I'm from Brazil and we help farmers to structure their harvest funding. My question is when do you do the buy future contract of 3.40? In April? or in the day you will liquidate your cash operation ?
Yep...could be an approach. The video shows a ag producer that actually feeds cattle as their business...so this video shows how they can offset risk. If you have that business....cattle feeding, your business streams are custom feeding (no risk on price), but that may not keep your lots full....so they also buy cattle to be effecient...so this helps them manage that price risk.
Because you would be speculating in that scenario. If futures went down instead of went up, that long position would cost the feedlot money. But since they’re physically buying the cattle, they would have made up for that loss in their hedge account by turning around and buying the cattle at a cheaper price
You can stick your market up your @ss, my cattle are born here, they die here, my customer’s can come and go with few restrictions and see how we operate, we dry age. We set our own prices and our customer”s hands are shaking when they write the check, they feel so lucky. If you don’t get dirty, you have no business participating in agriculture. Ironically, we’re cheaper than the grocery store.
In this scenario, is it showing the possibilities of choosing either path? In reality, I can choose either one, correct? So for your example, could I have chosen to invest only in the futures contract? I got confused near the end of the video where you showed the net price. I guess my confusion comes down to if we need to be involved in the cash market and the future market, or if we can just choose the futures? Or is it a strategy to not put all of our commodity in one market, so we would want to be half in futures, half in cash? I hope this makes sense. Amazing video!
Good question. The video shows what is called a hedger...in both markets and typical for an ag producer to manage risk. You can sure trade in just futures market and try to buy low and later sell high...or sell high at first, then buy low. This person is called a speculator and tries to make money on price moves in the market. I may try to make a video on this perspective. Good idea. Thanks
Hi Dr. Hanagriff, my name is Roger. This lecture was definitely a trip down memory lane to high school economics class. I do remember discussing these topics and bullet points, but I didn’t have a firm grasp on it at the time. I do to a certain degree now after this, but I know there is quite a bit more to learn. These foundations will help me when I discuss my goals for enrollment into college and how I can incorporate that into a future ag business. Thank you for sharing your knowledge with us on RU-vid. And I legit took notes.
These lectures are pure charity, thank you so much for providing these lessons online. I cannot believe how underrated this is- especially looking to how our relationship with the agri industry changed during the recent epidemic, people should be interested in this field more than ever. Excuse the pun. In all seriousness, with the spontaneous scarcity of all things being expected you would think someone would have the desire to solve the problem? Or at least understand it... So here I am, a whole year watching people fight over beans and butt paper because they don't understand. Its sad to see no one else here.
The values quoted are usually by cwt or commonly called hundredweight. So, then the values you see are $/100 to get a price per lbs...which is just another way to show the price...by lbs or cwt.
Hello Dr Hanagriff, I am studying a Bachelor of Agribusiness majoring in Rural Science in Australia. I was wondering if you could make a video covering this concept and explain why this is the case ? “Economists claim that economic surplus is maximised in markets which are perfectly competitive and at equilibrium.” Thanks Ashlea
Thanks for the question and lots of economic theories... however a surplus... supply exceeds demand would be more of an issue in the lack of perfect competition. I could do a video on consumer and producer surplus and that concept could help. Thanks and note to come
