1 Agri-trading and Agri-trading and Hedging: Hedging: Opportunities for Opportunities for Farmers Farmers Ann Berg Ann Berg Futures and Commodity Markets Futures and Commodity Markets Specialist Specialist Implemented by Financial Markets International of Washington, DC and Mumbai, India. Commodity Futures Market Project National Conference on Emerging Platforms for Agriculture Marketing
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1 Agri-trading and Hedging: Opportunities for Farmers Ann Berg Futures and Commodity Markets Specialist Implemented by Financial Markets International.
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Agri-trading and Hedging: Agri-trading and Hedging: Opportunities for FarmersOpportunities for Farmers
Ann BergAnn Berg
Futures and Commodity Markets Futures and Commodity Markets SpecialistSpecialist
Implemented by Financial Markets International of Washington, DC and Mumbai, India.
Commodity Futures Market Project
National Conference on Emerging Platforms for Agriculture Marketing
What is hedging?What is hedging?
Hedging is the transfer of risk Hedging is the transfer of risk from one party to another by from one party to another by
buying or selling futures contractsbuying or selling futures contracts
Lock in an attractive priceLock in an attractive price Achieve income stabilityAchieve income stability Avoid riskAvoid risk Plan cropping mixPlan cropping mix Obtain better credit arrangementsObtain better credit arrangements
Who should hedge?Who should hedge?
Warehouses that stock seasonal Warehouses that stock seasonal inventories (short hedgers)inventories (short hedgers)
ExportersExporters Importers Importers Any supply chain player wanting to Any supply chain player wanting to
avoid price risksavoid price risks
Which farmers should hedge?Which farmers should hedge?
Large capitalized farmers able to Large capitalized farmers able to withstand margin callswithstand margin calls
Farmers with year to year stable Farmers with year to year stable productionproduction
Farmers with skill set and Farmers with skill set and sophistication for futures tradingsophistication for futures trading
Only about 30% of US farmers hedge Only about 30% of US farmers hedge
Short HedgingShort Hedging
Short hedging involves the sale of Short hedging involves the sale of futures contracts against ownership futures contracts against ownership of the underlying commodityof the underlying commodity
Short hedging Short hedging by warehouse by warehouse