Using futures properly

[danm]

Does anybody know of a good website or homestudy course that a person could use to learn how to hedge properly & use the futures to protect yourself.I have done the options thing but not that satisfied with it.So I am watching the futures etc.There seems to be alot of traders with advice for them,but they really don't know what you are expecting.
So any info would be appreciated
Thanks Dan

[melvill]

Dan, I can't tell from your message where you are writing from. If you're in Alberta, Alta. Ag. has a very good course called FutureSim that we have been using for years to teach hedging, basis management and cash selling. Unfortunately, it can't be used as a homestudy learning tool. If you live in Alberta and if you could get some of your neighbors together, you might be able to have a FS course in your community, provided, of course, any of the Alta. Ag. Market Specialists would have time to teach it - it's getting late in the winter extension season to book courses with us.

Alta. Ag. also has a Marketing Manual for producers. The manual contains a lot of info including some ideas on hedging, etc. However, really detailed information would on hedging would require a book all of its own.

Check the Winnipeg Commodity Exchange web site. They used to have a pretty good publication on hedging that was available at little or no cost.

If you'd like anymore info you can e-mail me directly at lee.melvill@gov.ab.ca.

[bbrindle]

Agriculture Canada has a home study course "Managing Market Risk", on line at http://www.agr.ca/policy/risk/course/english/

At one time the intent was to put it on a CD Rom but I don't know if that ever happened.

[TOM4CWB]

The best advice I can give is that predicting the Futures market is like predicting the weather, (actually they are related), and this market is very unpredictable.

We learn that 80% of farmers who trade futures become speculators and gamblers, this could by why the CWB does so well. Farmers do not have the self dicipline generally to efficiently handle this marketing tool.

My advice is to use futures only in a direct hedge transaction, and if you are wanting to speculate, buy options.

If you do hedge, make sure you have lots of cash, if a position has been locked in that is profitable for your farm, but needs $100,000 in margin money, will you have the resources to ride the storm out? Many times farmers cave in and end up losing $100,000 because the market reversed after they bailed out! The decision was right but the execution of the market transaction cost big time.

Just ask the Power companies in California who hedged the futures but didn't do the basis, and now are bankrupt! This is another problem solved by doing a deferred delivery contract and buying a Call option.

But what do I know, according to the CWB I am just a dumb farmer who has never marketed any wheat or barley!

[danm]

Thanks for the info I will look at the ag Canada site.I am farming in SW MB
Dan