Farmland Derivitives

[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