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AlO-Lancaster Farming, Saturday, August 8, 1998
Limit Risk Only
The various avenues of risk management were explored at the
Ag Horizons Conference in Harrisburg last week. The day-long
conference examined how changing government attitudes are
affecting agriculture and how hedging, options, and the futures
market Can be tools to help farmers.
If these tools are to be of any value, farmers must calculate
their costs. If you don’t know your costs, including interest and
depreciation, as well as input costs, you have no basis for locking
in a profit with a futures or options contract.
Another warning should be given about the differences
between hedging and speculating to farmers who are optimists by
nature. If you are going to depend on the weather and other
hazards to insure a crop and thus a profit in any given year, you
naturally have faith that by fall, you will have a good crop. And
you hope the price is good enough to bring in a profit.
Faith and hope are good qualities for the farmer.lf you didn’t
have these qualities, you will never plant crops in the spring.
But faith and hope can also get farmers into trouble in the
futures market. If you believe you will have a good, profitable
crop in the fall, it is a very small step to begin to believe that you
could add to your good fortune in the fall by buying additional
crops on the futures market.
For example, if you have 100 acres of beans in the field that
look quite promising, faith and hope may say to you, “Buy sever
al contracts of beans on the futures market and add to your good
fortune in the fall.”
But now you have added 10,000 bushels of beans to your 100
acres of beans in the field. You not only become dependent on the
weather and other hazards to get a good crop in the field, you have
also exposed yourself to the potential wild fluctuations of prices
in the bean futures market with corresponding margin calls and
potential large losses. This takes farming to the most elevated
point of risk possible
So, use the futures markets and options only as risk manage
ment tools. Sell the crop you have in the field. Limit risk by lock
ing in a profit for your crops when the market gives this profit to
you. Most times this will be either before or after harvest.
Farmers don’t need any more risks than they have in the day to
day operation of their farms. Leave the speculative risks of the
futures markets to the boys in Chicago.
Saturday. August 8
Hereford Junior Farm Fair, Here
ford High School, Parkton.
Pa. Holstein South Central
Championship Show, Ship
pensburg Fairgrounds, Ship
pensburg, 9:30 a.m.
Clinton County Fair, Mackeyville,
thru Aug. 15.
Maryland State Picnic, Maryland
Holstein Association, Coldspr
Kids’ Day On The Farm and Old-
Time Plow Boys Plowing
Show, Pa. German Heritage
Center, Kutztown University,
Pa. Hereford Association Field
Day, Stone Ridge Manor,
Garrett County Ag Fair, Garrett
Highway, McHenry, thru Aug.
Transfer Harvest Home Fair,
Transfer, thru Aug. 15.
Bedford County Fair, Bedford,
thru Aug. 15.
Greene County Fair, Waynesburg,
Queen Anne’s County Fair, 4-H
Park, Centreville, thru Aug. IS.
Dairy-MAP, MAP On Tour,
Brookside Dairy (George Fam
ily), Homer City, 11 a.m,-2:30
❖ Farm Calendar *
Butler Farm Show, Butler, thru
Sykesville Ag and Youth Fair,
Sykesville, thru Aug. 15.
Venango County Fair, Franklin,
thru Aug. 16.
Warren County Fair, Pittsfield,
thru Aug. 15.
Fair, Washingtonville, thru
Tioga County Fair, Wellsboro,
thru Aug. 15.
Dawson Grange Community Fair,
Dawson, thru Aug. 15.
Sewickley Township Community
Fair, West Newton, thru Aug.
Kutztown Fair, Kutztown, thru
Dairy Profit Seminars at Empire
Farm Days, thru Aug. 13.
Empire Farm Days, Seneca Falls,
N.Y., thru Aug. 13.
Elk County Fair, Kersey, thru Aug.
EAYF Exotic Animal Farm Tour,
Paul Zimmerman Farm, 7:30
Grazing and pasture meeting.
Forks Farm (John Hopkins and
family), Orangeville, 7 p.m.-9
Harrold Fair, Greensburg, thru
To Tell Ag Story
Recent report from the coun
cil for Agricultural Science and
Technology (CAST) stated “The
U.S. population is complacent
with the quantity of their food
supply, but less so with its qual
ity Having the best food supply
in the world is not good enough;
they worry increasingly about
food safety and nutritional con
tent as well as the water quality
They are environmentally mind
ed but lack knowledge about
agricultural production prac
tices. They want some regula
tion in the food production/safe
ty arena but also want some reg
ulation in the food
production/safety arena but also
want to remain internationally
competitive.” Their image of
modern agriculture comes from
rights groups, vegetarians and
Individual farmers can not fight
the battle alone. This is why
farmers of each commodity need
to unite to solve problems
together and educate people on
the increased awareness, con
cern and action farmers have
taken on the environment, food
safety and animal welfare.
To Look At Dairy Options
Options are the right to buy a
futures contract. By purchasing
Pasture Walk, Steve and Ruth Ann
Derrenbacher, Heirland Farm,
Johnsville, 7 p.m.-9 p.m.
Cut Flower Short Course, Wye
Research and Education Cen-
ter, Queenstown, Md., thru
Dauphin County 4-H Fair, Farm
Show Complex, Harrisburg,
thru Aug. 15.
Chester County 4-H Roundup
Sale, Romano 4-H Center,
Honey Brook, 4 p.m.
Lancaster County 4-H Swine
Roundup, Manheim Farm
Show Grounds, 7 p.m.
Healing Herbs Safety and Effica
cy, Hunterdon County Exten
sion Center, Flemington, N J., 7
Middletown Grange Fair, Wright
stown, thru Aug. 16.
Cumberland Ag Expo, Newville,
thru Aug. 16.
Rough and Tumble Engineers 50th
Threshermen’s Reunion Aug.
12-19, midway between Lan
caster and Coatesville on Route
East-Central Classic Holstein
Sale, Lycoming Fairgrounds,
Hughesville, 7:30 p.m.
Lancaster County Sheep Roundup,
Findlay Township Fair, Clinton,
thru Aug. IS.
(Turn to Page A 22)
put options you are placing a
minimum price you receive for
milk. If the price goes up you
still receive the higher price but
if the price goes down you have
locked in your price. Buying
options is similar to insurance.
The more price protection you
buy, the higher the premium
cost. You hope milk prices never
drop, but if prices do drop dras
tically, then you are thankful
you brought the protection Now
is the time to start studying
options and how they may fit
into your operation.
To Participate in USD A
Dairy Options Program
USDA this fall will be con
ducting a Dairy Options Pilot
Program (DOPP) in 7 states. Six
counties have been selected in
each state. Pennsylvania is one
of the selected states with
THE REAL SLUGGARDS
August 9, 1998
Proverbs 6:6-8; 10:4-5; 13:4;
15:19; 18:9; 20:4; 24:30-34
2 Thessalonians 3:16-23
My dictionary defines slug
gard as a person who is “habitu
ally inactive or lazy.”
I must say that I cannot
recall encountering anyone who
fits this definition. Of course, I
have known some who are hard
er workers than others I have
known some people who get lazy
streaks from time to time,
myself included. But I have
never known anyone who is
“habitually inactive or lazy.”
This could simply be an acci
dent of chance, geography or cul
ture I grew up among the
Pennsylvania Germans, a cul
ture founded on industriousness
and hard work But I suspect
that these two attributes are
found that comprise the people
of the USA If we have bought
into any value from our
Christian heritage, it is the
That does not mean that all
of us work hard or that there are
not sluggards among us. Nor
does it mean that the work ethic
is as highly prized and practiced
as it once was. It is difficult to
make accurate comparisons
with now and then. Then, people
worked longer and harder
because they had to
WORK & SLOTH
If we catalogue the teachings
of Proverbs concerning work and
sloth there is almost nothing in
them that 99 percent of us
would likeh deny or reject
• The pi eparedness of the ant
is an example to the lazy person
•Thost who plow, plant and
harvest when the season is right
•People who are slack in
their wmk are destructive to
•The path of the laz\ person
is filled with thorns
• Diligence is rewarded
• Laziness results in poverty.
I saved that one until last,
because I believe there is more
to poverty than laziness. Some
people are poor because they are
lazy. Yet, some of the hardest
workers I have known were peo
ple who were still poor despite
Lancaster, Bradford, Franklin,
Crawford, Berks and Chester
counties being named pilot
counties. Dairy farmers in these
counties will soon be receiving a
letter from the Federal Risk
Management Agency announc
ing the DOPR This is an educa
tional program on the use of
Basic Formula Price (BFP)
option contracts as a means to
establish a floor price for milk.
The intent of this program is to
encourage farmers to learn more
about dairy options by actually
using them. If you have any
questions about this program,
contact the county extension
office in one of the pilot counties.
Feather Prof’s Footnote: “The
ultimate distinction of greatness
is determined by the amount of
excellence over and above the
their industry. For them, dili
gence was unrewarded. I also
have known people who are
quite affluent without being
industrious. Some of them have
never done a day’s work. Others
were good workers but unwise
managers of money.
I have known people who
know only how to work hard.
They do not take time from their
work to spend quality time with
their families, help neighbors or
be good citizens. There are peo
ple who are dedicated only to
work and fail to take care of
themselves physically, mentally
and spiritually. Some people
take pride in working them
selves into bad health or even
SLOTH & POVERTY %
Many today believe that peo
ple are poor because they art
lazy. But if we all really believed
in the sacredness and necessity
of work, why would we fail
provide enough jobs that earn a
basic living for those who want
to work? At the same time we
are taking people off the welfare
rolls, we are also cutting th£
number of jobs available.
“Downsizing” gives the he to
what we say we believe. It is
hypocritical to uphold the work
ethic and then for the sake of a
better profit take away that
I see a lot of “HELP WANT
ED” signs around Dallas. But,
when I have checked into these,
I find few, if any, of them paying
enough to feed, clothe and shel
ter the employee. The jobs avail
able may be located too far away
from the willing worker In
many cities there is inadequate
public transportation or none at
all. To operate a car to get to and
from work—purchase, maintain,
insure and run it —costs more
than many employees can
afford. Is it any wonder that peo
ple who face barriers such as
these grow cynical and remain
in poverty, often on welfare
and/or into crime, living on the
thinnest margin of life?
Maybe the real “sluggards”
are those of us who believe in
work but do not believe in it suf
ficiently to make our system
Published Every Saturday
Ephrata Review Building
1 E. Main St.
Ephrata, PA 17522
Lancaster Farming, Inc
- A Steinman Enterprise
William J. Burgess General Manager
Everett R. Newswanger Managing editor
Copyright 1996 by Lancaster Farming