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Post by Gregory Hewett on Apr 25, 2008 13:51:41 GMT 5.5
Use the article the was distributed in class for this discussion forum. Have a good weekend! Mr. Hewett
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Post by rikke on Apr 26, 2008 10:23:29 GMT 5.5
This article is about farmers who no longer have other time than being on his farmers, because there is so much to do, and so many things there isn’t right these days. Furthermore, the prices on crops like wheat, corn, and soybean goes up and down all the time, so it can be hard for farmers to keep up. This article is also about the global environment there is creating challenges for a lot of traditional farmers, so that is also why it is hard for the farmers.
Why does the price go high up and down all the time? What exactly is it the global environment does? Because of this, are many farmers doing to loose their jobs? Why is it exactly wheat, corn, soybeans where the price does up and down, why not other corps? What kind of systems is it they are designing?
My opinion to this article is that, I think that it is unfair for the farmers, because their job is to be on their farm. However when the price goes so high up and down, how are they suppose to keep up with it all, they almost can’t, and that is what I think is unfair. Another thing is that because there is so much work for the farmer to do, because they don’t want to loose their farm or job, they work almost all the time, so they barely have free time. To underline this, when they don’t have any free time, they barely see their family, and that is not good, both for the farmer and his family.
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Post by eunjucho on Apr 26, 2008 21:30:14 GMT 5.5
As crop prices rise, farmers face volatile risks in futures market
Eun Ju Cho Developing Nations
This article is about Fred Grieder, a farmer and other farmers who are having difficulties with futures markets. Basically, it is about farmers and how they are in risks because they do not know the futures prices since the prices change so much these days. According to this article, the price swing for soybeans has tripled its monthly average, causing people almost impossible to find out futures prices. And because of that, the system is getting less reliable including the futures contracts and options, according to the article. Apparently, the cost of the trading options is rising as well and that means that the farmers have less choice. Some are even refusing to buy farmers' crops and the farmers can’t lock in prices. The system – futures trade, contracts, and all that – used to work really well until now and it is on the verge of breakdown, according to the article. Plus, because of these ups and downs of grain prices, a lot of farmers have to hedge with less reliable futures markets, which is bad for them. They might lose a lot of money in the future. The article says something about how they can lose 10,000 dollars in one day.
I found this article quite challenging. I really would love to understand this article fully and better because it is an interesting article. I understand the part about futures markets, contracts, and options because we talked about those in the class but I do not understand few things in this article such as hedging and ‘lock in the price’. I think I know what they are but I am not sure. They are way too complicated for me.
However, I think it is just sad that the farmers are having these difficulties. If they do not know the futures prices, then they will not be able to make agreements or contracts to sell their crops in the future. It is even more devastating that the sources are now almost unreliable due to the unpredictable changes of the prices.
I think this has something to do with food crisis that we talked about in class as well. Suddenly there are more demands and fewer supplies so the prices have raised which also might have caused these price swings. I am not sure but I think there are some connections between them.
There are few questions that I would like to know the answers to: -What are the causes of these big changes in prices? -Don’t they have a backup for system for futures market, in case it didn’t work, like how it is now? -If they don’t, why are they not coming up with more effective solutions? -Why is this happening now? The article says that the system has worked fine during all these years. Even if it is because of the prices are so unpredictable and change so much, there must be more reasons than that. So, those are the things I was pondering about.
However, in the future, I do not think the situation is going to get any better so soon. Not until they can use that system again and not until the food crisis is solved. So, for now, I think they will come up with other effective systems other than that to get going, sooner or later. If that is not possible, I think farmers will feel extremely miserable as well as the futures markets. The farmers might become poor because the markets may not want to make any contracts when the prices keep changing. I hope that doesn’t happen though.
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Post by yeeun on Apr 27, 2008 17:35:31 GMT 5.5
(Summary) Before 1980s, farmers were able to predict the price of crops in the future, and so were the buyers. Hence, hedging between farmers and buyers were very active -because it benefited both of them. More specifically, farmers could handle the decrease price of crops, in the cash market, by future contract, and buyers could predict the certain amount of profit when they sell the crops to the market. But although the idea of hedging is very brilliant, it is not really helping both farmers and buyers because the price of crop is too volatile. So their fear from changeable crop prices stopped hedging, and now the buyers refuse to buy. It does not mean there was not any change in crop prices before 1980s. There was, but it was not as volatile as today¡¯s. At that time the alternation of prices could be handled. In worse, since the financial tools, the farmers have to predict the price of crops, are so old and primitive, it is almost impossible for them to make a future contract. In addition, because of this volatility of crops, farmers need to pay more insurance premium. In easier way to explain the reason of this, like the reason health insurance companies ask more premiums for unhealthy and ill people than healthy ones, the volatile prices cause more situations the insurance companies need to support financially. Therefore, the poor farmers need to pay more premiums for insurance. However, today there is not anyone able to handle the volatility of crop prices (72% ~ 100% increases and decrease) unless they are not the one over controlling the prices of crops. Conclusion and question 1) One part of this article mentioned that the monetary support of investors on farmers cause volatility and stabilization of crop prices, then, how do the investors cause these two contrast situations? 2) Do the farmers need to pay some money for the future contract as a security? Well if it is, why can¡¯t the buyers pay the money to the farmers first and take it back when the farmers do not produce the promised amount of crops? 3) Why this situation is started happening after 1980s? 4) I do not think the investors are supporting farmers only because of their interest of rising prices of crops. Is it also because they want to over-control the farmers and moreover the entire grain business? 5) Though this article is all about the effect of changeable crop prices on grain business, what are the effects on the consumers? Reflection Through many articles and news reports, I really feel that grains are really different from other commodities. What I mean is because grains are one of necessities of our lives, the consumers can never ignore it and not buy it. But also because of this kind of characteristic of grains; constantly required, there are many companies trying putting it under their control. So whenever I read articles about these companies, I always think about one question; how about consumers? Since, these huge companies own the grain business, they decide the prices of crops differently every time and present the problems off volatile crop prices. But the consumers still need it for their own stomach. Then, can I say, these consumers are also on these horrible companies¡¯ hands? Maybe, in some ways, it is true, but I do not really want it to be like that. So while I was reading this article, I could really thought about how to be a strong consumer in the world market and a wise shopper for my happiness. P.s Although this article was quiet challenging to read and understand, I think it is a very interesting print material to share together.
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Post by jayanth23 on Apr 27, 2008 18:13:12 GMT 5.5
After reading this article I got to understand the consequences of futures market. Although they are calculated risks taken by farmers the market is unpredictable. After reading this article I still don’t understand even why it exists. If people are losing $10,000 a day what is the point of keeping up the practice. In the United States farming is not a popular occupation and if they want to keep the ones that they have they have to solve this problem immediately. Adding to this confusion is the rising price of crops. All these events are contributing to huge losses in the American agriculture industry.
Due to the unstable market insurance premiums will also rise. This could mean that the farmers will pay insurance companies the same amount that they invest in their produce. This basically mean that farmers will have lower profit margins which decreases the chance of development and expansion. At this rate there will by no farmers in the United States as they will have to charge higher prices and subsequently cannot compete with Third World farmers.
In my opinion they should do away with futures market, as due to the instability of the market there are just too many consequences involved. I don’t understand what is the advantage of such a thing existing. Maybe in the 1980’s it was acceptable but now I don’t think its worth it. I also don’t understand why the prices are fluctuating a lot, what causes that? And if what happens in Chicago affects prices all around the world doesn’t mean that other farmers around the world getting affected too. There should be some form of protesting or something as to click in someone’s mind a new way to help the agricultural industry develop in the modern world or at least relief the world from this food crisis.
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Post by hawklim on Apr 27, 2008 18:44:39 GMT 5.5
As crop prices rise, farmers face volatile risks in futures market
This article is about Fred Grieder, who is a farmer and having seriously hard time because of the future market and food inflation around the world (such as wheat and corn). Even though the value of the money is similar, but the prices of the products are getting higher day by day. It means more you produce, more you earn. However, the prices of the products are decided not from the farmers, but the stores, that are taking their own for inflation, but nothing for the farmers. So, the farmers need to work longer time, but get paid same even though the price is going higher.
By this article we can see that every countries are having hard time with food inflation, but there are no proper solution still now. Another thing what we can see is that farmers can do something, but Fred Grieder is just too shy to complain about this situation to the government. Well, we know even though he complain, the government will not listen to him at all.
In my opinion, as I read through this article, I really realized how the farmers or any workers who are working overtime and not getting paid properly even though it is private works. Furthermore, I also realized, how important is the fair trade is, and how it should be used as soon as possible. It is also related with human rights, if workers are not get paid properly, what is different from the slaves?
Questions Why inflation is still affecting the world economy even though the value of money is similar?
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Post by meehye on Apr 27, 2008 19:38:48 GMT 5.5
This article is about crop price which is that really bad for people and farmers. The crops price is up and down very much. Some day, price goes up very high some day goes down very low. And also, farmers want to sell higher price but buyers want to buy low price. That¡¯s why, farmers have to check price everyday for selling their crops. And also, farmers have problem with insurance premium. Insurance premium have to take care about farmers. For example, farmer cannot sell their crops because of high price. So lots of crops are wasted so insurance premium have to pay for farmers, but nowadays, lots of crops are wasted more than last year, so they cannot pay all the crops in insurance premium. So farmers have problem about that. And then the price is Chicago Board of Trade decided the crops price. And also, they cannot help farmers, they cannot do anything, even though, they do not know about what they have to do and why this kinds of happen nowadays.
When I read this article, I feel so sorry to farmers and poor people because when the crops price goes up, farmer cannot sell their crops that much and they wasted lots of their crops, so that means that will give lots of damage to farmers. Also, poor people like a house helper and driver are really poor people, then how they cannot buy their food. So they will hard to survive. So it will be really big problem of our society. When they crops price goes up, all the people feel really hard to survive their life. even though, farmers and poor people and every people who live that kinds of society. Even, In Korea also lots of vegetables and fruits price goes up, it is really big issue in our society, poor, rich everyone have problem and complain about this. So government have to think about this situation, they have to care about their citizens and nationality people.
I have question about that, before this kinds of happen what government do for people? Even they try to work for their people? Then from now what they can do for people? Also, why Chicago Board of Trade made price goes up? If crops price goes up, then what kinds of advantage do they have for their nation? If they have advantage, does it really important for their country or society without their national people? And in the reading I really do not understand hedge. What is exact meaning of hedge or hedging in this article?
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Post by jihyeyun on Apr 27, 2008 19:54:06 GMT 5.5
This article is about serious risks that the farmers face, fluctuation in the price of grains. Before farmers could roughly predict or assume the price of their grains in the markets. However, nowadays farmers find so hard to find themselves in the market. Furthermore, weak dollar makes the crops more competitive. One of reasons is that because of ¡®global warming¡¯, people have difficulties to keep tract of weather so that farmers can¡¯t prevent. Moreover, even though farmers want to use financial tools which used to be the best way to predict the price is now getting expensive and less reliable. One solution is provided to address or prevent this unpredictable price of grains: futures contracts. Or people have options that whether people want to carry out the future trade yet if it is not required. As the trade becomes riskier, it becomes more expensive and people end up put more money to protect or lock in the price of crop from weather, shipping disruption and so on. I have read an article about the rise of crop price. The article provides some reasons, western countries more demand on main crops like corn for using as the ¡®biofuel¡¯ instead of using fossil fuel and other developments in agriculture increase the price of the crops.
In addition, effect of higher demand of crops and the increase in price of crops cause shortage in basic crops or grains which are used for main food in the developing world. Serious problem is that along the all the consequences of increase in the price of crops, the only victims are developing nations. Even though the price of crops increased in the world markets, developed nations which are trying hard to preserve the natural resources, especially fossil fuel still buy those crops and use them as their fuel. While rich countries use those crops as alternatives of their fuel, developing world is suffering from shortage of their basic need, food.
What are the realistic solutions that World Bank or International Monetary Fund can do for the price of crops? What are the financial tools? What are the causes of fluctuations in the crop price? Are there any middle men in these trade and do they create some inequality in price of crops?
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Post by sujata on Apr 27, 2008 20:36:15 GMT 5.5
This is article is about the volatility of the prices of commodities, and how it affects farmers more than consumers, but also how it can affect consumers. It basically shows us how unstable prices have become, compared to what they were a decade ago. It talks about how many farmers cannot even afford to trade their goods, with a price drop or rise due to how expensive it is. It brings in the idea of futures contracts, which allowed farmers to stabilize their prices, as insurance, but this could also hurt them if the selling rate went up. It also talks about how interest rates have been affected by this volatility.
This instability of these commodity prices has affected both the farmers and consumers, but not really the middle man that much. To begin with, the futures contract can affect the famer because he could get himself into a safe position but also hurt himself if prices change in his favor. Earlier this was predictable and worked well for the farmers, but not due to this price volatility, farmers are not able to secure their prices and never know what to accept as a pay or how much they are going to gain or lose. This also affects many consumers that cannot afford to pay the higher prices. Most people in developing nations live with no money to spare, and even a fifty-cent rise in the prices would affect their daily lives, and they would either have to work harder, which is practically impossible with the amount of work many of them already do, for example construction, or they would end up eating less. This would also be count against them, because they cannot afford to cut down much more food or could have people dying of malnutrition. Though this issue really affects consumers and farmers, it doesn’t seem to affect the middleman as much, because all he is doing is sending the goods from one place to the other.
The issue this article brings up is important because it is affecting not only farmers in developing nations but also farmers in countries like America that are living much better lives than those that are in developing nations. It brings in the significance of insurance and how that is necessary for farmers, and this instability isn’t working for most of them. Since earlier, they were able to predict approximately how much money they would earn. It also points out how unnecessary the middleman can get and that farmers can work directly with the shops.
Eventually I believe, that first of all farmers are going to figure out how the middleman is not needed and find other ways of getting their products to the shops directly. This might also help in bringing stability to their prices, because the middleman is defiantly making a profit, which he wouldn’t make if the farmer dealt directly with the stores he was supplying to. That might only marginally bring the price down in some cases but still affects many consumers, that couldn’t afford the product earlier. I also think that consumers are going to get more involved in finding out how much they really should be paying, and making an effort with how fairly traded these products are. The only thing that worries me is how long it is going to take for famers and shopkeepers to figure this out, and deal with it.
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Post by sohee on Apr 27, 2008 20:49:09 GMT 5.5
Summary Basically this article is about the volatile prices on wheat, soybeans, and corns. Fred Grieder, who has been farming for 30 years in his life, says as the price of his crops become higher, they also become volatile. Although it is good for the farmers when the price of their crops go on, it is not good for them when the prices go down even before they harvest it. For example, based of the measure of volatility, wheat prices volatile three times the average volatility in a month, soybeans three times, and corn prices twice its monthly average. In addition, the financial tools that farmers usually use are getting more expensive, but less reliable. These volatile prices also affect the future price for the crops, how much the farmers will be paid for their crops, and the future prices for farmers¡¯ crops. Volatile trading, which is one of the affection of the future prices for farmers¡¯ crops, is becoming riskier, and more expensive. So the poor farmers are not even able to do the volatile trading.
Reflection After I finished reading this article, I was so sad about what farmers talked about in this article. If the price of crop goes down before they harvest it, then after they harvest it, all the crops that they harvested are useless. Although they sell it, because they get very little price for their crops, it is impossible for them to live and it doesn¡¯t keep them in the way how they live, but make them worse. In addition, I am sure that this is not only one country¡¯s problem, but the world¡¯s problem. Therefore I think we have to try to find the solution for this and help them to get fair prices for their crops.
Research I felt I didn¡¯t fully understand this article, so I decided to research on this topic. Based on my research, the crops are not the only thing which is volatile. Beside the crops, sugar, milk, oil, meat, and meat products are volatile. Also I could find out more about the volatile price on crops, which is corn prices are already at $5.67, and it could jump to $7 to $7.50 if farmers plant as the report predicts. Wheat prices could decline from recent highs of more than $13 to $6.50 to $7.
Question -What is volatile trading and why is it becoming riskier and more expensive? -What are the solutions for the volatile prices of the crops and what is the reason of this volatility?
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Post by arpitav on Apr 27, 2008 21:37:44 GMT 5.5
This article is one of the most difficult articles I’ve ever read. I didn’t exactly understand all of it. But from what I did understand, this article is basically talking about the difficulty the crop prices are bringing to the farmers in the U.S. It’s saying that because the crop prices are so unreliable the farmers can lose money or gain money in the blink of an eye. There have been different groups of farmers coming together to figure out what to do about this and if there was any way to reduce the crop risks. But this is still very confusing to me because shouldn’t the farmers benefit from rising crop prices? And if they are losing money, where is that money going? Who’s getting that money? Many investors are now investing their money in grain, corn, soybean, and wheat, now that the prices of crops have started increasing. But what I don’t understand from all of this is that if more people are investing more in different things, won’t the prices decrease again since the supply would be greater and enough for the demand? Also what I don’t understand is if this ‘system’ was invented that long ago and it was actually working back then, what changed that brought up all of these problems? I think that Farmers will strike because their livelihood depends on the crop prices. I also think that some farmers may just give up and move on to other occupations where their livelihood isn’t dependant on something so unreliable.
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Post by eliasse on Apr 28, 2008 0:18:55 GMT 5.5
This article is show how hard and impossible can be the life of farmer on these days. The cost of the principal products that these people make is constantly increasing, the cost of a single piece of it cannot give them a certain hope for the future. If the prices keep increasing in few years most of these farmers will remain without a work, because the prices will be to high to support a farm, so lots of years spent by these farmers will be nothing, and they will remain without a work to find.
This article gave me lots of reflection, by reading this article I saw the same problem that today is engaging most of the farms present in all world. I heard from these days that even in Europe the prices of the vegetables and other products that are produced in a farm are dangerously increasing, and these people cannot find a way to escape from it, because support a farm today costs lots of money, and the farmers have to get back all of these money on the products that are selling. So today is not a special thing to find vegetable that every months increase its price until it becomes impossible to buy and to sell. In my opinion this thing should be stopped as fast as possible, because now there still remain some chances to save this economy and save these farmers that spend their lives only in this job.
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Post by pyeonchan on Apr 28, 2008 3:05:17 GMT 5.5
Nowadays, one of the main issues that this world face is the drastic increase of food prices. As the price increases, it is very helpful for the farmers to have the chance to earn more money. Besides, the weakness of dollar in international community provides the competitive status for the American farmers in competing with the farmers in other regions of the world. However, the farmers still have the concern due to the volatility of grain prices. There are several ways to settle down the price of food, but the extreme volatility in the market makes it more difficult.
As a side effect of volatility in the food price, both farmers and buyers cannot predict the price and control it. So, the futures contract between the producers and buyers cannot be achieved. In order to settle down them and abbreviate the fear of people, the changes in the system are necessary. The current system was established fifty years ago, but the market condition was not volatile at that time. As the condition of market changes, the system should be changed, but it has been maintained for fifty years. The current fluctuation on the food prices is generally three times higher than before, which shows the seriousness of this issue.
As another effect of the volatility of food prices, the farmers should pay more money on their insurance. As the risks of earning money by selling the grains increase, the insurance companies may ask the farmers to pay more. Moreover, this is not just a problem for the farmers, but the problems of consumers. The experts predict that the costs are going to be paid by the consumers.
The volatility that the farmers currently face is extremely serious. The farmers will not be able to keep planting, fertilizing, and lobbying with the high rate of volatility and less reliability. In order to keep providing the food for the world, the farmers should keep working on their area, and the government should think of increasing the supplies. I believe that people should stop eating the cattle. People give huge amount of grains to the cattle in order to grow them. The vegetarianism would increase the amount of food for human beings. Of course, there would be many solutions, and it should be discussed through the international authority to stabilize the food prices.
Question 1. The volatility of food prices is caused by the sudden increase of demand for food. Why does it happen? 2. Can this problem be resolved if there are sufficient amount of food? What are other factors that contribute to the volatility?
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Post by miriam on Apr 28, 2008 8:12:49 GMT 5.5
As crop process rise, farmers face volatile risks in futures market By Diana B. Henriques
This article deals with the new upcoming crisis-Crops and their prices. Even though I really found it quite difficult to understand it at first by the time I was at the end of the article I had a basic understanding of the main sub-topics of this issue.
I thought that the article did not clearly enlighten the reader as to what some of the terms that the author uses mean. Personally, I found it a little hard to understand some phrases like “to hedge” or “elevator owners” and due to this I was unable to fully understand the article as a whole, therefore I found it quite challenging to write about it.
However, when I read the first part of the article, I found the statistics quite shocking as I never imagined the numbers to be so high, especially when they are still described as “swinging”. “For example, a widely used measure of volatility showed that traders in March expected wheat prices to swing up or down by more than 72 percent in the coming year, three times the average volatility that month and the highest level since at least 1980. The price swing expected in March for soybeans was three times its monthly average, and the expected volatility in corn prices was twice its monthly average.” “Prices of broad commodity indexes have” also “climbed as much as 40 percent in the last year and grain prices have gained even more – about 65 percent for corn, 91 percent for soybeans and more than 100 percent for some types of wheat.”
Due to the increasing demand there is a decrease of availability. As a result of this farmers want to have a lock-in price for all of their crops. This is becoming increasingly difficult as “some grain elevators are coping with the volatility and hedging problems by refusing to buy crops in advance, foreclosing the most common way farmers lock in prices.”
So, in a nutshell, this article brings to our attention the difficulties that today’s farmers are faced with throughout each and every single harvest and therefore throughout their entire lives. Farmers have always had to deal with unpredictability’s like crop disease and weather or not nature will be on their side, now they also have to deal immense fluctuations in the price range for their crop which puts more pressure on them – and while their crops demand “a closer eye on the derivatives in Chicago”, their days get longer.
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Post by sam on Apr 28, 2008 19:13:30 GMT 5.5
Volatile Risks in Futures Market
This article addresses the ironic issue of rising crop prices. One might ask why this is a problem for the farmers who grow this expensive crop. But as crop prices rise, future prices become more volatile, with prices jumping either up or down to up to 72 percent. Needless to say this can be concerning to farmers who need to follow the market to keep up with the prices. The little time they have to themselves is often spent trying to keep up with the prices and the financial market so as to not be surprised by the sudden rise or fall of the prices.
There are many reasons for which the farmers should be concerned about the prices. For one thing, they obviously must look out for how much they need to grow and what not. Many farmers in the past have been forced to take on second jobs, with already barely enough time to spare. The crops simply aren’t enough to provide for them anymore. So by watching the market rise and fall, it is easy to see why they might get nervous.
The volatility of the crop prices also put the future crop contracts in jeopardy. No one wants to invest in an unsure market without the guarantee of success, therefore contracts could be cancelled, changed, or never even made, which is, needless to say, not all that helpful to farmers. They need to have some guarantee of where their crops are going to go. Without the “safe haven” of reliable contracts with reliable customers, they have no confidence as to their source of income.
The reasons for this volatility are reasonably numbered. Unpredictable climate change can play a huge role, as well as natural disasters or the failure of crop. It is virtually impossible to predict when these extremely unfortunate experiences will come around, therefore making the prices equally harder to predict. Availability of the crop will clearly change the prices at dramatic rates. Those in charge of setting the bar for prices have a big job on their hands, as well the pressure of many farmers to do a good job.
Besides these clearly depressing consequences, farmers also have to deal with the rising of insurance premiums. This is another concerning matter for farmers, many of whom have little money to spare on themselves, and need the insurance on the case of a serious problem. Paying extra for insurance, without the safe assurance of a steady income, is a risky requirement. But they simply have no other alternative.
So putting all these things together, it goes unsaid that the volatility of prices is far from beneficial to farmers. They have to deal with all of these problems as simply another part of their career. Unfortunate, but true.
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Post by divya on May 4, 2008 20:01:33 GMT 5.5
This article, as said many times above is about farmers and their recurring issues with unpredictable and fluctuating prices of crops. Surprisingly to me, farming is much more a science now because of the amount of work and detail that is paid attention to such as fertilizers, abundance, supply and demand, prices, and even future economic predictions.
I did not know that farmers prepared so much in advance as to how their crops would be viewed in the future. I always thought that the unpredictability of products because of supply and demand would always be present, but obviously this is an issue that has many worried because of the numerous, sudden reports on the matter. I am not exactly sure of the reason of this spontaneous distress in farmers but I do know that some of it is due to the population increase and global warming but I feel there is a main reason that is still vague in my mind.
I can understand why this is a problem for farmers because as it is their business is built on a product that is volatile without other factors such as population growth affecting it. Farmers endure much risk because of weather, shipping, demand and if their crops grow period. With this added headache, the farmers are scared to jeopardize their already low salary by investing in future contracts or deals. There is not much room for insurance on their products.
I recently read an article in International Herald Tribune about how in Cambodia, an extremely poor country, certain schools provide free meals for children because many starve. Because of increasing rice prices, which is a common food, the schools are becoming less and less capable of being able to provide these meals. Because of these meals, attendance rates in schools increased and more girls and boys were being educated and could concentrate more on their studies. Because of the increasing prices, which was unpredicted, these children cannot be fed and need to stay home to beg on the streets. After I read that, i realized how pathetic conditions can become and how much these volatile prices can affect the people drastically.
This current event at first seemed to be a temporary ordeal, but after seeing so many cases of how this affects economies, countries, people, and jobs, it shows that this problem is not one that will go away easily.
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Post by sofiekh on May 4, 2008 20:42:41 GMT 5.5
The article is about the farmer, Fred Grieder who has 1,500- acre farm in Carlock, Illinois. In order to hedge his risks and know what he will be paid in the future for the crops he is planting he has to use unreliable and expensive financial tools to keep an eye on the markets in Chicago. The crop prices are rising do to growing worldwide demand and the weak dollar is making the producers more competitive globally. The problem is that although the crop prices are much higher they are also much more volatile, for some crops up to three times the normal on the average the volatility. The increasing volatility increases crop insurances and the cost of trading in options, which is the tool used to hedge the falling prices. Some buyers are even coping with the higher volatility by refusing to buy crops in advance. Hence, preventing farmers from locking the prices.
although it is not clear from the article what the reason is, it looks like the system used by farmers in the US to run the farms based on being able to sell their crops in advance is not adequate for today’s global economy, where the price on crop is depending on exchange rates, global demand, and investments from institutional investors. it sounds like this is a big problem for American farmers, however, it would be interesting to know how the issue is handled in other parts of the world. Maybe a better system can be applied in the US inspired by other markets.
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