Farmland Derivitives

[farmaholic]

http://issuu.com/westernproducer/docs/160323213813-20479ad6c8da4215bdb254b2b02ca7e8/9?e=0

March 24, 2016. Page 8, Ed White, Hedge Row column.

Would this be a good or bad thing?

[farmaholic]

Would there be enough volume and volatiltiy of land sales to make a derivative work?

...another smoke and mirror shell game investment instrument?

[furrowtickler]

Gary Pike behind this scheme too ??

[ajl]

Well this could be a way of mopping up the huge amount of cash central banks have printed. It could be a way of hedging the downside as we switch from an inflationary to deflationary environment.

[bucket]

Call me a tin foil hat conspiracy theorist but after watching the big short isn't this what the movie was based on?

[biglentil]

Have you been watching used equipment prices and farmland. Deflation is a myth perpetrated mainly by central banks to create the illusion that the paper they print is holding its value.

[biglentil]

They may use derivatives like they do with silver and gold to artificially keep the price at bay. What they may find instead is the physical sales price of land will be significantly higher than spot. #ComexIsBusted

[farmaholic]

Its like creating an asset that doesn't exist....a way of participating in an asset's market without buying or selling the physical asset. "Betting" on a move, either up or down and paying a premium to participate, like insurance, it may expire worthless.
Basically can be as simple as "options"...calls and puts and other complex contracts.

Does anyone think there is enough volume and volatiltiy in the farmland market for this to work?
Land prices always seemed to be like a slow moving sloth. Stable slow appreciation over the long haul.

Re land and machinery prices: it's turn at deflation may be coming. Pulse prices will help keep the farming "thrive" alive.... broken record....I still say there is a correction coming. Buy your put(?)!

[ajl]

Lets see: oil at $100 per barrel summer of 2014 now at $38 and change today. Corn over $8 US per bushel Aug of 2012 now under $3 in some locals. That is what deflation looks like so it may be more real than you think. Here in Canuckistan local currency is a joke so we have not experienced much deflation yet but in $USD terms deflation is real.

[biglentil]

I could not imagine how they could enforce physical delivery of such an individually unique asset class. Like gold and silver markets they would deem it appropriate to settle in more paper like the futures based GLD and SLV etf. Maybe they will call the etf LND lol. In such case it wouldn't matter if any physical existed for sale or actually traded.

[farmaholic]

I don't think there is anything physical meant to be traded... just paper transactions. Like Weber said in another thread... indexes. Based on "sales", not participating in the sale just betting on moves up or down off an index.

Is that how it would work?...

Where are the financial guys on here?

Cotton? your forte.

[biglentil]

The derivatives spot price is set by supply and demand of puts and calls, never on the actual physical sale elsewhere. Used to be a long could request physical delivery on the comex and in certain instances may still be. What your talking about farma is more akin to land sports betting and would be ripe for fraud. Just like a rigged boxing match.

[cottonpicken]

Never read the article so just shooting from the hip. Guessing it is just a contract between two parties to flatten the risk curve just like other derivatives. If a pension fund maybe wants to buy up a bunch of land and a bank offers a swap both parties can hedge themselves in the event of a move against them. Just always view th dervitavies as a big insurance program minus the Sharks of the world who bet naked meaning no underlying position to hedge against. Of course it's a whole lot more complicated ,just trying to use as few as words as possible.

Doubt it's to big of a deal one way or another other then if your local credit union starts playing around and gets caught in a death spiral and you loose your deposits. But with everything else going on right now if you haven't looked into your local banks,not the big boys,and you have large deposits I suggest tripping the alarm bell in your head especially Canadian western bank but that's getting off topic