This is the way I see it.
The commodities and futures market is very complex also misunderstood by most people including the farmer. Some of the reasons are:
1.We have a verity of people in the commodity market place and all try to use it too their advantage.
2. Farmers and grain companies, use it to sell their grain into the future months to secure an asking price for their grain.
3. Speculators buy and sell and are only concerned about making money, they don’t care whom they hurt in the process.
4. Speculators work by buying and selling, futures, puts, calls options and it can be cash or commodities. [it is confusing at this point but is irrelevent because to what I am leading too]
The easy way to understand this is that these speculators are betting against each other, that the price of the product is going up or down and the person that is right makes money and the other loses. Sure looks like a casino to me.
5. There are large banks, money managers and brokerage firms involved in the commodity market that can move the market in their favor by using weather, artificial shortages and surplus on related rumors.
6 These large corporations can totally distort the price of grain by trading large volumes and they are using some poor suckers money to do it. [Investors that trust their broker may have one with a good radar screen.]
7. Can you believe that some farmers think they can compete in this chaotic jungle?
8. There is risk management to control this. [ I wouldn’t touch this one with a ten foot pole] but you could be lucky and outguess the variables.
Now this is just an example and it is approx. It would cost you $20.00 per tonne up front for the transaction to buy a $340.00/t May canola put option and you must active it on or before the third week of the previous month. [ April. ] Therefore the change has to be in your favor by $20.00 a tonne to brake even also these rates could go much higher or lower.
The way I see it, if the change is in your favor active it and collect before expiry date or throw your contract away if it doesn’t hit your target price.
Puts go down and calls go up I think but I am sure someone will correct me if I am wrong.
The reason I put this example in because most of the time the explanation is plus this minus that equals that and no specific values to use and calculate percent of loss or profit.
The no value presentation looks better if you are trying to promote this concept on risk management, but it starts to look ugly when you use real values and the amount of money you pay up front.
I don’t think that the average farmer needs this additional gamble or stress to market the way some people are suggesting.
There is no way we can kick the big guys out of the commodities marketing circle so lets try and beat them at there own game.
This is one way I think a farmer can market and not saying is the only way to get a reasonable return:
Lets use GRAIN PRICING ORDERS system to sell your grain and this is done at your local grain elevator at no cost.
This is the way it works you sell in lots throughout the year.
1. Example you want to sell a 100 tonnes of canola in the month of December for $360.00/t and it doesn’t matter what the future price is for that month. The grain company will place that order on the market free of charge and if some one buys it at that price you must deliver in that month and will receive your asking price.
Now if the price is too high and nobody buys before the expiry date then you can just through that contract away and put the same grain on to some other month and change the asking price if you wish.
Keep in mind that if some one offered you that price it becomes a valid contract.
or
2. You can in any given month sell on the futures the amount of your choice at the price that is offered and lock it in. Also I suggest sell in lots.
3 I don’t like to buy a bases contract, because that means you have un-priced grain on the market and the speculators will set a price for you, especially if you leave it to the last day. Also this contract is between you and the elevator company that wants to handle your grain. I have seen cases that the bases are lower in your selling month than you paid earlier. [ gamble????]
4. Now this marketing system gives you cash flow for the season.
5. A contract is a gentlemen agreement between two parties backed up by law so that the same can’t abuse each other.
6. A contract can be altered or cancelled in writing if agreed too by both parties signed and witnessed.
7. I know the above system works because I used it myself at UGG.
Safeway can buy a can of beans and sell the same for one percent profit then use the same money to follow the same procedure many times over in the same year and at the end show a good return on their investment.
We can work with Safeway by putting other priced product on the futures market and that way we both know the price of it.
Comments needed
The commodities and futures market is very complex also misunderstood by most people including the farmer. Some of the reasons are:
1.We have a verity of people in the commodity market place and all try to use it too their advantage.
2. Farmers and grain companies, use it to sell their grain into the future months to secure an asking price for their grain.
3. Speculators buy and sell and are only concerned about making money, they don’t care whom they hurt in the process.
4. Speculators work by buying and selling, futures, puts, calls options and it can be cash or commodities. [it is confusing at this point but is irrelevent because to what I am leading too]
The easy way to understand this is that these speculators are betting against each other, that the price of the product is going up or down and the person that is right makes money and the other loses. Sure looks like a casino to me.
5. There are large banks, money managers and brokerage firms involved in the commodity market that can move the market in their favor by using weather, artificial shortages and surplus on related rumors.
6 These large corporations can totally distort the price of grain by trading large volumes and they are using some poor suckers money to do it. [Investors that trust their broker may have one with a good radar screen.]
7. Can you believe that some farmers think they can compete in this chaotic jungle?
8. There is risk management to control this. [ I wouldn’t touch this one with a ten foot pole] but you could be lucky and outguess the variables.
Now this is just an example and it is approx. It would cost you $20.00 per tonne up front for the transaction to buy a $340.00/t May canola put option and you must active it on or before the third week of the previous month. [ April. ] Therefore the change has to be in your favor by $20.00 a tonne to brake even also these rates could go much higher or lower.
The way I see it, if the change is in your favor active it and collect before expiry date or throw your contract away if it doesn’t hit your target price.
Puts go down and calls go up I think but I am sure someone will correct me if I am wrong.
The reason I put this example in because most of the time the explanation is plus this minus that equals that and no specific values to use and calculate percent of loss or profit.
The no value presentation looks better if you are trying to promote this concept on risk management, but it starts to look ugly when you use real values and the amount of money you pay up front.
I don’t think that the average farmer needs this additional gamble or stress to market the way some people are suggesting.
There is no way we can kick the big guys out of the commodities marketing circle so lets try and beat them at there own game.
This is one way I think a farmer can market and not saying is the only way to get a reasonable return:
Lets use GRAIN PRICING ORDERS system to sell your grain and this is done at your local grain elevator at no cost.
This is the way it works you sell in lots throughout the year.
1. Example you want to sell a 100 tonnes of canola in the month of December for $360.00/t and it doesn’t matter what the future price is for that month. The grain company will place that order on the market free of charge and if some one buys it at that price you must deliver in that month and will receive your asking price.
Now if the price is too high and nobody buys before the expiry date then you can just through that contract away and put the same grain on to some other month and change the asking price if you wish.
Keep in mind that if some one offered you that price it becomes a valid contract.
or
2. You can in any given month sell on the futures the amount of your choice at the price that is offered and lock it in. Also I suggest sell in lots.
3 I don’t like to buy a bases contract, because that means you have un-priced grain on the market and the speculators will set a price for you, especially if you leave it to the last day. Also this contract is between you and the elevator company that wants to handle your grain. I have seen cases that the bases are lower in your selling month than you paid earlier. [ gamble????]
4. Now this marketing system gives you cash flow for the season.
5. A contract is a gentlemen agreement between two parties backed up by law so that the same can’t abuse each other.
6. A contract can be altered or cancelled in writing if agreed too by both parties signed and witnessed.
7. I know the above system works because I used it myself at UGG.
Safeway can buy a can of beans and sell the same for one percent profit then use the same money to follow the same procedure many times over in the same year and at the end show a good return on their investment.
We can work with Safeway by putting other priced product on the futures market and that way we both know the price of it.
Comments needed
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