I help grain and livestock operations with fluctuating prices by Hedging using Futures and Options.
What is Hedging with Futures & Options?
You may have heard these words from a neighbor, on the radio, or in a seminar and have really not understood what they meant.
The exact definitions can be found by going to my Terminology page by clicking here.
Every farming operation should at least be acquainted with the basics.
Most importantly, there should be some understanding of how futures and options can give you more marketing flexibility and reduce the risk in your farming operation.
Producers are in the business to grow wheat, corn, soybeans or other commodities and sell them at a profit.
Think of all the different factors that influence your profitability – production costs, growing conditions and the uncertainty of future crop prices.
Some years may be profitable, other may not.
Hedging is a way to control the risks associated with the volatility in grain and livestock prices or currency fluctuations.
Specifically, it is a way to help give you more flexibility in your marketing decisions.
Some common scenarios I build strategies for that you may have encountered….
“It is now harvest time and I need to sell my grain to make bin space, but I am not happy with the price. Is there a way to sell my physical grain and still have the upside if prices go higher?”
“I’m concerned that wheat prices are going to go lower. However, I do not know how much I’m going to have yet off the combine. How can I protect myself rather than just doing a production contract?”
“My livestock (bison/cattle/hogs) are going to be sold to the US. Is there a way to control the currency fluctuation of my revenues?”
“There is a livestock insurance program through my province. I find that I’ll pay my premium every year and not use it. What alternatives do futures and options give me?”