Lancaster farming. (Lancaster, Pa., etc.) 1955-current, August 01, 1998, Image 34
A34-Lancaster Farming, Saturday, August t, 1998 Weighing Your Options Agriculture is one o( the few industries in the world where pro duccrs do not know then final selling pnee until alter (hen goods .ire sold This is why tanners ate sometimes called 'price lakcis' ralhei than "price makcis As margins loi returns continue to shimk ninny tanners arc begin ning to cxploie futures markets and hedging as wavs to help stabi lize their returns Puce volatility and uncertainty arc often things that not only producers, but also uscis of commodities attempt to minimize One ol the newest players in the commodity tree markets is the dairy industry As the government price support systems begin to lie phased out, daily tanners will need to become awaic of their allcma Feed Saved is Profit Made Farmco’s efficient feeders put feed into your animals, not on the ground. Built for years of rugged use, they are a wise investment in your farming business 10 models available in 27 sizes. ftfedWTW* gaeaiwrtheeinalfitnn, 7 V2'indi*meier. Delaware Hooter Equipment Middletown DE * 410/341 4028 Jays Barns Fronkford DE * 302/732 6040 Maryland C B Hooter Georg* Hines Equipment Intercourse PA • 717/766 8231 Union Bridge MD • 410/775 2629 Cuds Welding Potomac Valley Supply Rome PA • 717/24 7 2539 Hagerstown MD • 301/223 6677 Walter G Coale Inc Churchville MD* 410/838 6470 New Jeraey Brodhecker Farm Newton NJ • 201/383 3592 Quality Structures Flemmgton NJ • 908/782 7408 lives For dairy fanners, the prac tice ot using the lulurcs and op tions markets to protect against low milk prices is known as hedg ing Richard Mollitor, an agncul- ( ture risk management specialist at the Chicago Mercantile Exchange, defines hedging as the practice ol taking a position in the futures and/or options market opposite to that in the cash market The op portunity includes locking in prof itable selling prices (by selling fu tures contracts) and establishing a minimum selling price while still allowing you to benefit from a using market (by buying Pul op- tions) The Put option becomes your insurance' against a dra matic downturn m the price of Richard Kenwodhy Bernardsville NJ • 908/766 0063 Pennaylvanla BlueMt Diesel New Tripoli FA *6lO/298 3483 Ert <S Henry Equipment New Berlmville PA *215/367 2169 Fields Implement Eighty Four PA * 412/222 1154 l-ARMCO MFG. 2937 Inshtown Road • Ronks, PA 17572 • 717/768-7769 Here is an example from one of Monitor's actual accounts of how hedging can woik tor a dairy farmer On April 1. a dairy farmer buys a June 12 00 BFP Put op tion lor SSO cwt (the cost was $5OO per 100,000 lbs of milk) At the lime, the June BFP futures price was II 07 cwt The next fix c weeks saw dairy prices drop significantly, and by May 7, the June BFP futures were at 10 82 This 85-cent drop (1167-10 82) was responsible for the farmer's option price increasing to a value of $1 16 per cwt On May 7, the Put option was sold at I 16 to re alize a profit of 66-cents per cwt (I 16-50) With a commission cost of $45 per contract (4 5-eents per cwt ) the net profit was 61 5- ccnls per cwt The farmers who understood the market were able to realize 61 5-eents per cwt more revenue than the fanner who chose not to hedge their milk production As milk supports are eliminated, it will be more important than ever that small to medium sized farms arc able to maximize their returns The need to have a fixed price sev eral months out will eventually supersede the farmers' reluctance and fear of becoming involved not. Dealer Today George Gross Inc Dover PA • 717/292 1673 Gunther Heussman Inc Longeneckers Inc Emmaus PA • 215/965 5203 Williamsburg PA *Bl4/793 3731 Glenn Wagoner Darlington PA • 412/827 2184 Kellers Farm Machinery Quakedown PA *215/536 4046 Lapps Barn Equipment Gap PA *717/442 8134 Leaders Farm Equipment Everett PA* 814/652 2809 milk Just like insurance, you hope you II novel need it but il you do you'll be glad you took the tune to figure it out According to Mollitor, dairy futures arc beginning to gain more widespread acceptance The big gest challenge is a lack of under standing based on misconceptions of the futures market Lebanon Valley Implement Richland PA • 717/866 7518 Marshall Machinery Honesdale PA • 717/729 7117 Newswanger Machinery Kutztown PA • 610/683-5970 Reiffs Farm Service Shippensburg PA • 717/532 8601 Romberger Farm Supply Khngerstown PA * 717/648 2081 Rovendale Ag & Barn Watsontown. PA • 717/536 9564 Wyn Koop Farm Equipment Marlon Center PA • 412/397 4960 One way some dairy farmers will be able to explore the com modities markets is a pilot pro gram announced by United States Secretary of Agriculture Dan Ghekman called the Dairy Op tions Pilot Program (DOPP) Farmers m selected counties will be offered a financial incentive to use options to manage their price risks Producers who participate m the program will be trained on how to use the commodities mar kets also As farmers become exposed m BUILDINGIHE FUTURE It’s either these, or a pet goat. // Stihl Grass Trimmers • Designed for the weekend gardener • Lightweight, easy starting • Double-line, Autocut' 1 mowing head • Stihl dependability from turf to treetop • Made in USA T STIHL Available at these servicing dealers Abbottstown Jonestown Ronks MESSICK’S RD #1 BOX 255 A 717-259-6617 Allentown LEHIGH AG EG. INC 6670 Ri ' Rd 610-398*2553 BOMBERGER'S LAWN 1-800-779-3616 & GARDEN _ .. . Lititz: 717-626-3301 Carlisle Lebanon: 717-272-4155 TRI-BORO , CONSTRUCTION SUPPLIES <-oysviue/« 1490 RITNER HWV 1-800-248-6590 Dallastown CONCRETE, INC. 435 Locust St 717-246-3095 1-800-632-9018 East Earl GOODS LAWN & GARDEN CENTER Route 23 717-445-4490 Elizabethtown MESSICK’S Rheems Exit*Rt 283 717-367-1319, 717-653-8867 Ephrata • WES STAUFFER ENGINES & EQUIPMENT 23 Pleasant Valley Rd 717-738-4215 ohrata. Hershi HOLLINGER’S LAWN & Ephrata, Pa. 717-859-5455 717-656-2710 Hershey, PA 717-533-4060 Gap GAP POWER EQUIPMENT Corner of R 1 30 4 Rt 897 Hummels Wharf n CU ™ G }L„ nFF R pbffk hiimmfi ’<s TFVArn RENTAL CENTER DEER CREEK HUMMEL S TEXACO Rt EQUIPMENT, INC. 717*743*7459 717 " 336 ' 3945 720 Whnlor School Rd 717 743 459 goi . 879 . 5090 | DISTRIBUTED BY KEYSTONE STIHL more and more to the ups downs of a free market econoi futures and options can offer si insurance against a dramatic do' turn m the market They may keep you and your family on farm Feel free to send your co ments and ideas to Jim Shirk The Lancaster Chamber of Coi merce & Industry, PO Box 15f Lancaster, PA 17608-1558, email at jshirk@lcci com or c him at (717) 397-5551 BLUE MOUNTAIN ENTERPRISES, INC, Fit 72 South 717-865-2994 Lititz/Lebanon GUTSHALLS INC. Loysville - PA - Carlisle 717-789-4343 717-249-2313 iAlisterville C.B. HOOBER & SON 717-463-2191 Oxford DEER CREEK EQUIPMENT, INC. 6600 Limestone Rd 610-932-8858 Palmyra HERR’S REPAIR SHOP RO 2, Box 115 A 717-838-1549 Palmyra WEAVER’S LAWN & GARDEN 740 W Main St 717-838-5999 Peach Bottom A.K. SAW SHOP 214 Peach Bottom Road Pequea DREXEL AUTO SUPPLY 333 Steinman Farm Road ockeysville MD SUBURBAN SALES 10757 York Rd 410-785-2277 Whiteford MD 717-284:2916 mr ,01 TfIHL TERRITORY A & B SALES & SERVICE 370 Newport Road 2 Miles South of Rt 23 Along 772 Thru Monterey Schaefferstown MARTIN’S EQUIPMENT CO. Rt 501 1 1/2 Miles South of Schaefferstown, PA 717-949-6817 Shartlesville MOUNTAIN VIEW SUPPLY, INC. (Formerly Shartlesville PO Box 529 610-488-1025 lensbun LEINBACH FARM EQUIP. 1120 Rltner Hwy 717-532-5511 Tamaqua CHARLESS. SNYDER* INC. RD 3 717-386-5945 Waynesboro QUINCY TRUE VALUE HARDWARE Rt 997 in Quincy 717-749-3653 Hagerstown. MD EBY’S LAWN & GARDEN 16409 Falrvlaw Road 301-733-4158 IWI