Al6—Lancaster Farming, Saturday, January 23,1982 Farming’s Futures By David K. Sauder Commodity Advisor Trade Tech, Lancaster To properly understand the futures market, you need to keep in mind the two classes of people involved in a commodity contract. The hedger and the speculator. The hedger may be a farmer, a processor, or an exporter. Anyone who has the farm grains, meats or other commodities in their possession to back up their position in the market. A speculator puts up risk capital to buy and sell the commodities contract which the hedger offers to the market. While 90 percent the speculators lose money in their; trading, farmers and other hedgers who are properly advised and treat the commodities con tract as a price-protection in surance policy rarely lose money as long as they have the com modities to sell off the farm on the jiil I'M NOT L10N... The Classified Livestock Section Has Beastly Selections! UNDERGROUND LIQUID MANURE SYSTEMS Msg k*£ [m cash market. Their sales on the cash market offset any change m the price in their futures market contract. This week 'we take a look at leverage. While more farmers should not become speculators with their futures contracts, it helps your understand the speculator’s point of view when dealing with this market. The reason futures markets offer great profit potential to the speculator, with commensurate risk, is leverage, i.e., the ability to control large amounts of value with relatively little cash. When establishing a position in futures, the trader is required'to advance so-called margin, more properly a security deposit or earnest money, that guarantees fulfillment of file contract. This is M.H. EBY, INC. Manufacturer of Alt Ahuninm Track Bodies Livestock, Grain & Bulk Feed Distributor of i nnn Refrigerated Trailers Sales & Service Blue Ball, Pa. not a (jdii payment tor the com modity, nor is the amount related to the value of the product. Rather, a is security to cover any. initial loss that may result from adverse price movements. Us dollar amount is determined on the basis of market risk, which reflects price volatility. The exchanges establish the minimum initial security deposit for each commodity, and also the "minimum maintenance” deposit schedule. When the loss on a particular market position has utilized as much of the original security deposit as the main tenance schedule permits, the trader must bring his account back to the original level by depositing additional "maintenance” funds. Individual brokerage houses poay require higher security deposits than the exchange minimums. For example, if the original margin is $l,OOO, and the main tenance margin is $7OO, a price move in excess of $3OO against the trader means that the trader must bring his margin back up to $l,OOO Aluminum Livestock Body 717-354-4971 YORK CALCIUMCHIPS A SUPPLEMENTAL SOURCE OF DIETARY CALCIUM 39% Calcium _ ' less Than 1% Magnesium THE LOW COST ASSURANCE FOR FEWER CRAX Cest..less Ika 2 Bth » Marketable £g§s Pee 1000 Birds Pee Oaf I Available in Bulk or Bags °*!& fyr) YORK STOKE & SUPPLY CO. reed Dealer IJB I Roosevelt Ave. Ext., York, PA 17405 Today Vs Cl^ / 717-843-0981 by depositing additional funds, for example, to control about Conversely, any gam 1 resulting $25,000 worth of frozen pork bellies from a favorable pnce move will for an initial deposit of sl,soo—or be paid <to the trader, daily a $1,000,000 worth of Treasury bills desired, as it accrues without for $l,OOO. waiting until the trader’s position Rend youy questions aboiiv* is liquidated. futures trading to Farmer’s Security deposits (margin) often Futures, Lancaster Farming run lower than 5 percent of the Newspaper, Box 366, LiUtz, PA value of the contract. It's possible, 17543. York Farmers invite members to advisory councils YORK A meeting will be held explains. "These groups meet on Friday, Jan. 29 at Bp.m. at Mel monthly in individual homes to. Fifer’s in Peach Bottom Township discuss topics of interest to the for all members of the York farming community.” County Farmers Association, who are interestd in joining an advisory Presently, the local association council, announces Jack Oehoff, has four councils fo)rmed in the president of YCFA. county. Interested.persons should “Advisory Councils are small attend the Friday meeting, family discussion groups.” Dehoff Refreshments will be served ALFALFA GROWERS Plan now for a better croi Attend Our Alfalfa Meeting!! Open to all farmers growing^lfatfa. The Featured Speakers Are: —. Steve Fisher - FMC Wayne Mara - Stauffer Chemical John Flanagan - Ciba Geigy Dave Cote - Chevron John Yocum - Penn State Ext. Subjects will cover the total management _ of this crop. - : THURSDAY, FEBRUARY 4, 1982 LEOLA FAMILY RESTAURANT Meeting will begin with a lun£ti. $ Call for reservations by February 2 717-397-5152 ORfiAMR PLANT FOOD CO. tf f BULK BLENOS 1 Wfm f [ ANHYDROUS AMMOMiA J • Mixes uniformly with your feed • Uniformly consumed by the birds • Soft gray chips - look for them in your fee 11:30 A.M. at the 2313 NORMANROAD, . LANCASTER, PA I PHONE:7I7-397-5152 - Hours: Monday thru Friday 7to 4 Saturday 7:30-12:00 in’MO
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