Who Makes Money On Volatility?

[agstar77]

Conagra spinning off trading division , to Hedge funds along with food merchandising arm. They supply chips to McD's. Selling for 2 B. They claim the volatility has made them money, not actually producing anything, just the volatility.

[parsley]

Kudos if companies don't lose money during volatility. Risk can bring rewards.

The Wheat Board quips that it arms itself with a single desk to fight off volatility. How's that working?

Farmers will be recieving heaps of money with that strategy, right?

Parsley

[agstar77]

Farmers have been receiving cheques that won't bounce.

[parsley]

Doesn't sound as if Conagra's cheques were bouncing either.

Kaching
Kaching

Do the CWB farmer-cheques kaching during volatility?

Or is it just enough for momma to pay the utilities?

Do CWB farmer-cheques EVER kaching?

CWB employee cheques kaching every month.

Yes they do.

Parsley

[agstar77]

That's Ka - ching. Actually Conagra stock chart was pretty bad until just recently. One of their reasons for selling is to repay debt.

[jensend]

volatility is an opportunity as has been pointed out before. it's also a way for the big funds to relieve small investors or hedgers of their capital by pushing the market so far before correction that margin calls get impossible as we've seen in the last month or two. commodity trading is a zero sum game - overall profits equal overall losses. that's different from the stock markets. yesterday on bnn the grain trader they interviewed said this last rally has seen very little end user pricing so it's almost all spec. money moving in and hoping others will jump on the bandwagon. it also indicates end users are either covered or the prices are beyond what they see as fundamental value.

[parsley]

Thanks. I'll leave you to dwell on the dash.

Meantime you said Conagra heaped up piles of cash during volatility.

Did the CWB also heap up piles of cash in comparision to other years?

Parsley

[agstar77]

"It seems there is a growing consensus that futures and agricultural cash markets are in disconnect. Price volatility and uncertainty will undoubtly trickle down to the lowest common denominator. Even Martha Stewart would agree it's not a good thing for Farmers". Now who said that? The volatility belongs to the farmers who are smart enough to contract outside the pool. Good for them.

[parsley]

Farmers have to ask this question:

"How do I get more wheat and barley money out of the marketplace?"

The CWB is not getting enough for farmers, even though CWB staff dine on greenbucks-delight.

[parsley]

Don't know who said that, btw. I googled it and got nothing.

Volatility can be a normal part of the free market and eventually tames.

[Fransisco]

Personally I love the volatility.

Here is the way I look at it, the opportunity is in the variance.

[agstar77]

L Weber said it.

[parsley]

He must have read somewhere, at one time or another, that volatility is part and parcel of risk taking, so I will assume he has been lunching a lot with Flaman.

[parsley]

Newco News
Published by
Newco Commodities Ltd
had a few good words about risk and I'll quote some excerpts:


March 20, 2008

"Under the current market conditions
market risk should be a top priority for everyone involved in the financial markets, and yes that means farmers too."

"Although there are many good reasons for these prices they are all affected by individual economies in a global marketplace.
How these economies interact directly affects your farm gate price. The economic theory that is operating in the background is extensive and complex; it ultimately comes back down
to the most basic of all economic theories, supply and demand.

Canadian producers are directly affected by global policies and practices.

We Canadians must be aware of what
is happening in the world today, so that we can make informed cropping and marketing decisions.


Under the current economic situation marketing must not and can not take a back seat.

Nearby canola for example has decreased from $726.9/mt on March 3 to $567.7/mt as of this writing which equates to a $159.2/mt (3.61/bu) drop in price.

This drop is not considered extreme it is real. Although it is impossible to consistently hit the top of the market it is generally not impossible to lock
in profitable prices.

Locking in profitable prices should be a goal for all producers.

Although there is lots of economic turmoil in the US right now there is still time to make profitable marketing decisions.

[bduke]

I think LWeber's comments might have been referring to the hedge funds which, in my understanding, are deemed "hedgers" on commodity markets and are therefore excluded from taking deliveries of products, i.e. warehouse receipts etc. However, I would strongly argue that the entrance of funds,i.e. private eguiy, investment banks, mutuals, pensions,hedge funds,etc. have been the drivers of the dramatic and long, long overdue rise in grains and oilseeds prices. Try to name 2 or 3 grain merchants, market analysts, Federal or Provincial Ag economists or specialists that predicted these markets last summer. Goldmans, for example,analysed the CRB indecies and concluded the G & O sectors were grossly undervalued. In fact Goldmans have developed there own indecies for investors....only a month or two old.

The other benefit of funds is liquidity, the reason the CWB would not use the WCE even if they(WCE) had developed a milling wheat forum. While the expanding limits are emotionally and economically sensational, they provide entry and exit points which are critical to maintain liquidity.

BTW...I couldn't sign off without mentioning Martha Stewart....another of Spitzer's victims of his unscrupulously ambitious self interest. Martha was charged with insider trading ...alledgedly excercising a tip from her broker...found innocent...but jailed for contempt of court...having changed one answer while under oath....
Bill