A32— Lancaster Farming, Saturday, October 2,1982
Farming’s Futures
By David K. Sauder
Commodity Broker
Trade Tech, Lancaster
Some farmers, rather than build
storage and hold their crops until
later in the season when the basis
has narrowed, sell their crops at
harvest. Then they buy futures
contracts equivalent to their
production, and hold the “paper”
bushels instead of the real ones.
Those who use this futures
technique claim that their savings
on storage and financing make it
an attractive way to speculate on
the basis. However, it also exposes
them to more price risk than if
they held their crop.
Sometimes, futures also are used
to cut losses. Stockmen, in par
ticular, have used their technique
when they find themselves locked
into a downward cycle. Hedging in
a loss can be an effective way to
prevent even larger losses that
might put them out of business.
Although cash market contracts
may offer similar opportunities to
price your output in advance,
extend your selling period, and cut
losses, futures hedging can claim
at least one potential advantage
greater flexibility.
If you contract to deliver grain to
the local elevator at a fixed price,
the elevator then resells it, at a
merchandising markup, to
someone else who wants delivery.
The elevator cannot let you out of
FARMERS!
The Farmers For Thornburgh-
Scranton Committee, in coopera
tion with the Pennsylvania Ag
Republicans invites you to JOIN
US for a lunch and a
TRIBUTE TO
DICK THORNBURGH
on
FRIDAY. OCTOBERS. 1982
12:00 Noon in the Harrisburg
Marriott Inn
(Routes 283 and 441)
The past four years have been a
period of „ unprecedented
achievement for the state's
agricultural community. Dick
Thornburgh and Bill Scranton
have provided recognition,
support and leadership for
Pennsylvania agriculture, actively
seeking our advice and in
volvement.
Join us October Bth and
hetp us acknowledge that
Pennsylvania agriculture
has a Friend in Dick
Thornburgh.
Tickets for the Tribute to
Governor Thornburgh are $4O per
person, $75 per couple. Reser
vations can be made by calling
Jamie Kaizer at (717) 232-1982.
Paid for by Farmers for Thornburgh-Scranton
the contract without paying a
penalty to the buyer down the line.
A futures transaction causes no
such repercussions and that’s
why it can be entered into or offset
with one phone call.
Fixed price, short crop
Here’s a slightly different
situation: Suppose you signed a
fixed-price contract with a
processor but run into production
problems. Worse, it is beginning to
look like a short crop year across
the country. Rising prices may
mean a heavy loss if you have to
at
buy substitute bushels at harvest Purchase corn on
to meet your contract obligations. , , j >
Are you stuck? Not necessarily. -X
You can buy enough futures to CCJUIV fl I PTlt CIITV
offset your anticipated production J. J
shortfall. -a •
If you act promptly, any losses w* t't'gSk'W* rl £| G 1 G
suffered by later replacing the UICIIIvI
shortfall might be largely offset by . . Txnvirßsfrv parr _ Wi»h thp given moisture content. This in
gains on the futures. The futures PAHK Witt Scales the equivalent number of
thus protect essentially the same merging,, use of high- bushels in a ton.
margin projected from the cash Multiply this figure by the
contract. . ’ feeding livestock, more ana more auote< j pi .j ce f ora bushel of shelled
All of these obviously simplified couj isbeing corn. For example, if sheUed com
examples show how hedging .can (151/2 percent moisture) was|2.so
be useful to particular • b^hd . or m 2& a ton, 28
cases. Bdt no evidence percent#ioisture) used m j| rcent com would tav#
indicates that a farmer can don- tte grain iraue. , , n . value of tfs per ton.
sistently benefit from hedging, Aluch of this conuspurchased at the following weights
without careful study • tHe fam at thetadicated moisture levels,
markets and the situation-at any say 3 Sam Dum, Extension farm , _ lbs
g.ve„ . = geme.t ,peoalM. Penn £££ .
If you hedge, you have tp invent aiaie. . ... -
the time necessary, to .become “Farmers shoidd recognize the 24 62.25
familiar with futures, how they weight required to equal the dry , 25, -• 63.09
work, and how they might be matter in the standard bushel of - 26 , . - 63.96
useful to you shelled com at these higher , 27. 64.82
Send your questions about moisture levels,” notes Dum. ' 28 tt.72 * ■
futures trading to Farming’s psually high-moisture com is 29 • 66.65
Futures, Lancaster* Farming sold by the ton. To determined - 30 67.60
Newsnaner Box 366 Lititai PA ton value based on the price of the ~-31 , 68.58
Newspaper, Box «6, Utia, ra standard bushel, first dividh 2,000 32 • 69.5^
byj the*indicated weight for the 33 70.63
Endless Mt.
Harvostore
o o,
/*S
M W
From Illinois
★ * RON SKINNER ★ *
A Consultant on Digester
Design and Aeration
Systems
Send Your $lO.OO reservation today to:
ENDLESS MOUNTAINS HARVESTORE SYSTEMS, INC.
RD 5, Box 77A, Towanda, PA 18848
Phone: (717) 265-2200
(P.S. wives are free)
Check the following listings tor a breakfast or dinner meeting in your local area
Tuesday, October 5 at 7:30 PM
INGRICK’S RESTAURANT
2 mi. So. of Wellsboro
Wednesday, October 6 at 7:30 P.M.
JEFFERSON INN
Thompson, PA
ATTENTION
HOG FARMERS!!
Learn How Aeration Systems Can Cut Odors
In, Your Hog House-For Just Pennies A Day
ENDLESS MOUNTAINS
HARVESTORE SYSTEMS, INC.
MANURE MANAGEMENT
Highlights
• Digester Design • Aeration Systems
• Electric Slurrystores
FEATURING TWO LEADING EXPERTS:
Thursday, October 7 at 7:30 P.M.
HILLSIDE RESTAURANT
4 Mile Drive, Mofttoursvilte
Follow Grampian Blvd. until it turns into 4 Mile Dr,
IS PROUD TO PRESENT:
MEETINGS
From Pennsylvania
★ ★ TIM TRESSLER * *
Regional Marketing Manager
for Flygt Corporation in
17 Northeastern States.
Wednesday, October 6 at 0:00 AM
FIREPLACE ii RESTAURANT
Towanda, PA
Thursday, October 7 at 9:00 A.M.
QUALITY INN
Bloomsburg Exit 34, Rt 80