(Continued from Page Al)
of those same crops the farmers
are currently producing in the
field.
Michael Omdorff is the PFA’s
agent for futures trading. While
Pennsylvania farmers are tuned
into the weather conditions to find
out if it’s the right time .-to plow,
plant or harvest. Omdorff is tuned
into an electronic system hooked
up by a satellite dish outside the
Camp Hill office. The satellite
transmits futures prices as they
are listed on the Chicago Board of
Trade and The Chicago Mercantile
Exchange. These reports help
indicate Omdorff whether it’s the
right time to contract for a future
sale. While a farmer watches the
weather for signs of a coming
situation, Omdorff sits in his office
without a window and watches
what he calls his “window to the
world,’’ a screen that reports the
future prices of beans, wheat,
livestock. His job is to advise and
lock in contracts for members of
Pennsylvania Agricultural
Cooperative Marketing
Association (PACMA) who use his
brokerage service.
“The market waits for no man,”
Omdorff says. Forward pricing
means locking in a contract for
future delivery of a commodity.
Forward pricing is contracting to
sell a quality product, at a locked
in price, at an agreed upon place,
at a future time. Forward pricing
may seem like speculation,
because it happens on paper with
no real exchange of goods or
money; however, forward pricing
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Maxatawny, PA _
Ph; (215)683-7252
Chernobyl Disaster Affects Farm Prices
is as legally binding as an actual
exchange of goods. Waiting to go to
market with a product is
speculating, because the farmer
has to sell at the market price.
Omdorff explains that last
week’s jump and the subsequent
decline in the futures price of
wheat was caused by a number of
factors besides the Chernobyl
incident. “Because the old wheat
crop was discounted and oversold
and there were more sellers than
buyers,” Omdorff says, “futures
prices of wheat were lower than
they should have been." He said
the initial jump in price after the
Chernobyl incident was a reflec
tion of “short covering.” Ac
cording to Omdorff, the first rise in
prices happened not because
people were buying, but because
those who had “sold short” were
buying back to cover their selling
short. According to Omdorff, the
commercial shortcovering which
occurred immediately after word
of the Chernobyl incident, “pulled
in new marketing” which in turn
raised futures prices even higher.
While all agricultural com
modities saw a futures price rise
following the Chernobyl incident,
Omdorff explains why the Cher
nobyl disaster affected wheat
more than it affected other com
modities; 1) the Ukraine grows a
lot of wheat and sorghum; and 2)
wheat is considered the most
important world market grain.
The reason why futures prices
for wheat and other commodities
rose so high so fast, says Omdorff,
is that the prices were lower than
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ARNETT’S GARAGE
Rt. 9 Box 125
Hagerstown, MD
Ph: (301) 733-0515
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Perkasie, PA 18944
Ph.(215)257-0101
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LEBANON VALLEY
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700 E. Linden St.
Richland, PA
Ph; (717)866-7518
5.6. LEWIS AND SON
West Grove. PA
Ph; (215)869-9440
869-2214
they should have been in the first
place. The farm bill has reduced
loan support and caller for the
issue of payment-in-kind (PIK)
certificates in an effort to get rid of
a lot of 1985 grain surpluses. With
the reduction of loan supports, the
payment in kind certificates,
which were anticipated during
early May caused futures prices to
be driven even lower than “ihey
should have been, agreed Omdorff
and Ron Manley, Director of
PACMA, who helps farmers in
handling cash marketing.
So news of the Chernobyl nuclear
disaster was a catalyst that af
fected futures prices of
agricultural commodities,
especially wheat, by driving
futures prices up. Another time
prices were drastically affected by
news reports was in March when
results of the dairy buyout
program were announced on the
Monday after Easter. At that time,
prices for June cattle futures
plummeted from 61 cents per
pound to 53 cents per pound.
According to the PFA marketing
division, forward pricing is a tool
that gives farmers an opportunity
to lock in the futures prices for
their commodities at strategic
times when futures market prices
favor the seller. Farmers can find
out current futures prices and
when they see their commodities
going for prices that would cover
the cost of production plus allow
for some profit, they can agree to a
contract at that price.
Of course, the futures prices
may go higher after a farmer has
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RDI, Catawissa, PA
Ph; (717)356-2323
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M.M. WEAVERS SON
N. Groffdale Rd.
Leola, PA 17540
Ph; (717)656-2321
locked in a contract. In that case, a ways farmers can get some control
larger profit might have been of the price of their goods. Ron
made by waiting. But market Manley, director of PACMA,
managers at PFA advise farmers ' serves farmers who arae cash
to keep accurate track of the costs marketing their products. Some
of production so that they know farmers might prefer sacrificing
what a good price is. A good price some of the security gained by
is the price of production plus a forward cash contracting and take
margin of profit. As Orndorff says, on their own futures trading ac
“ You don’t go broke selling at a count where they assume basis
profit.” risk and gain flexibility. Qmdorff
Forward pricing, or forward serves those farmers too.
cash contractin'! («• one c* th’"”
Farmers Union
Applauds
Reclassification
HARRISBURG - Leaders of the
Pennsylvania Farmers Union
responded enthusiastically to the
news that the House Ways and
Means Committee had approved
an amendment reclassifying
casein imports as part of an
overall trade bill.
Casein, a milk protein
derivative, has traditionally been
classified as an industrial
chemical due to its use in such
products as paint and glue and has
therefore been free of import
duties and quotas.
In recent years, casein has been
predominantly used in food
products, such as non-dairy
creamers, non-dairy whipped
toppings, and imitation cheeses.
“Our dairy farmers get hit two
ways,” said P.F.U. President
David Stetler a Juniata County
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Lancaster Farming, Saturday, May 10,1M6-Al7
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“When we’re seeing record
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Stetler explained that by
treating casein as a food product, it
would be included in established
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“This has been Farmers Union’s
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“Advocates of ‘free trade’ won’t be
very happy about this amendment,
but we feel it may help keep some
dairy farmers in business that
makes it worthwhile.”
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