Volatile Risks in Futures Market

[Gregory Hewett]

Use the article the was distributed in class for this discussion forum.

Have a good weekend!

Mr. Hewett

[sarah99]

Muahahahaha I am the first to write a discussion forum .
Farmers all around the world, especially in the Chicago area, are facing drastic unstable risks in the commodity market, especially the soybean, corn, and wheat markets. The crop prices and the fall and rise of the market are extremely unpredictable. The system for farmers which had been working so well since 1949 has almost completely broken down in the past twenty or so years. Farmers are losing a lot of money, and as a result the consumers of the market may too.
Something must be done to figure this situation out, and soon. The farming areas around Chicago are not the only ones being affected…it is all over the world. In my opinion, the Chicago Board of Trade needs to bring their best brains together and figure out a solution before there are major consequences. If the farming business grows more and more unstable, who knows? Maybe many farmers will quit their jobs, and certainly many would-be farmers would decide against the farming business. The article said that the farmers and eventually the consumers will both be losing money. If this is true, who is gaining money? Not everyone can be losing money.
Also, if the system of the farming trade had worked so well in 1949, why? What has changed that makes the system so unstable? The people who must try to figure out a solution to the problem must ask themselves these key questions. Again, a solution must be found…and fast.

[nitika]

This article is basically about the farmers in the U.S who are facing hardship due to the crop prices. The crop price system is very unreliable and the farmers can gain money or lose money very quickly. Many famers of various places in the U.S get together, and hold meetings, where they discuss a new method, a new solution to reduce crop risks. Shouldn’t food scientists be doing this? If they discuss about how they can control the market so they get a decent price for their crop, how will they be able to put this force in motion?

I don’t understand if crop prices rise then aren’t farmers benefiting? But here they say they are losing money so who’s gaining it? The big corporate companies where the food is stocked?

Since the prices of crops are increasing many investors are investing in grain, corn, soybean, and wheat. But as we learnt in class if many people invest in it since the prices have increased because of the demand, won’t their be an increase in supply, and so won’t the prices fall down again? Won’t the investors face severe loss, because the demand will be less than the supply? It all depends on supply and demand.

If the system was invented so long ago, why wasn’t it changed before, even though people knew it wouldn’t work any more? Why did they procrastinate? Why doesn’t it work anymore?
Why does the man who sets the prices take into consideration the farmers view since it will be affecting them directly?

I think in the future many people will look into this matter and then leave it. Farmers may strike because this is their life. Also, many may find other jobs where they can earn more. I don’t think the market will change since farmers hardly have any say in it. The people who control the market profit, so why will they listen to the farmers?

This is the most difficult article ever. I hardly understood much.

[jungkyu]

I found the article!!!

As Crop Prices Rise, Farmers Face Volatile Risks in Futures Market

International Herald Tribune, 2008-04-23

By Diana B. Henriques


Fred Grieder has been farming for 30 years. That has meant 30 years of long days plowing, planting, fertilizing, and hoping that nothing happens to damage his crop.
"It can be 12 hours or 20 hours, depending," Grieder said.

But Grieder's days on his 1,500-acre, or 600-hectare, farm in Carlock, Illinois, are getting even longer. He has to keep a closer eye on the derivatives markets in Chicago, trying to hedge his risks so that he knows how much he will be paid in the future for crops he is planting. And the financial tools he uses to make such bets are getting more expensive and less reliable.

In what little free time he has, Grieder attends Illinois Farm Bureau meetings to join other frustrated farmers who are lobbying officials in Chicago and Washington to fix a system that was designed half a century ago to reduce uncertainty for food producers but is now increasing it.

Grieder, 49, is shy about complaining amid so much prosperity. Prices for his crops are soaring on the updraft of growing worldwide demand, and a weak dollar is making those crops more competitive in global markets.

But crop prices are not just much higher, they also are much more volatile. 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 for 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.

Those wild swings in expected prices are damaging the mechanisms - like futures contracts and options - that in the past have cushioned the jolts of farming, turning already busy farmers into reluctant day traders and part-time lobbyists.

The U.S. farming industry's frustration was expected to result in an overflow crowd at a public forum Tuesday at the Commodity Futures Trading Commission in Washington. Interest was so high that the commission, for the first time ever, was providing a Webcast of the forum, which it said was being held to gather information about whether crucial markets for hedging the price of crops "are properly performing their risk management and price discovery roles."

The additional costs that stem from volatility in grain prices - higher crop insurance premiums, for example - are not just a problem for farmers. "Eventually, those costs are going to come out of the pockets of the American consumer," said William Jackson, general manager of AGRIServices, a grain-elevator complex on the Missouri River.

Prices of broad commodity indexes have 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. This price boom has attracted a torrent of investment from Wall Street, estimated to be as much as $300 billion.

Whether new investors are causing the market's problems or keeping them from getting worse is in dispute. But there is no question that the grain markets are seeing volatility running well above the average over the last quarter-century.

Grieder's crop insurance premiums rise with the volatility. So does the cost of trading in options, which is the financial tool he has used to hedge against falling prices. 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.

"The system is really beginning to break down," Grieder said. "When you see elevators start pulling their bids for your crop, that tells me we've got a real problem."

Until recently, that system had worked well for generations. Since 1959, grain producers have been able to hedge the price of their wheat, corn and soybean crops on the Chicago Board of Trade through the use of futures contracts, which are agreements to buy or sell a specific amount of a commodity for a fixed price on some future date.

More recently, the exchange has offered another tool: options on those futures contracts, which allow option holders to carry out the futures trade, but do not require that they do so. Trading in options is not as effective a hedge, farmers say, but it does not require them to put up as much cash as is required to trade futures.

These tools have long provided a way to lock in the price of a crop when it is planted, eliminating the risk that prices will drop before it is harvested. With these hedging tools, grain elevators could afford to buy crops from farmers in advance, sometimes a year or more before the harvest.

But that was yesterday. It simply is not working that way today.

Futures, for example, are less reliable. They work as a hedge only if they fall due at a price that roughly matches prices in the cash market, where the grain is actually sold. Increasingly - for disputed reasons - grain futures are expiring at prices well above the cash-market price.

When that happens, farmers or elevator owners wind up owing more on their futures hedge than the crops are worth in the cash market. Such anomalies create uncertainty about which price accurately reflects supply and demand - a critical issue, since futures prices set on the Chicago Board of Trade are the benchmark for grain prices around the world.

"I can't honestly sit here and tell you who is determining the price of grain," said Christopher Hausman, a farmer in Pesotum, Illinois. "I've lost confidence in the Chicago Board of Trade."

David Lehman, director of commodity research and product development for the board's owner, CME Group, said: "We know that the current global environment is creating challenges for many of the traditional users of our markets, and we are very concerned. But there are a lot of things that are changing and there is no silver bullet, in terms of a solution."

Many farmers and people in related businesses blame the tidal wave of investment pouring in from hedge funds, pension funds and index funds for the faulty futures contracts and rising volatility. But those institutional investors' money actually adds liquidity to the market, which in theory should reduce price volatility, Lehman noted.

In any case, at current levels of volatility, options trading becomes riskier, and therefore more expensive - too expensive for many farmers like Grieder, who now has to hedge with the recently less reliable futures contracts.

That exposes him to the risk of having to put up more cash - to maintain his price protection - whenever a weather threat, shipping disruption or a fresh dose of money from Wall Street suddenly pushes up grain prices.

"If you've got 50,000 bushels hedged and the market moves up 20 cents, that would be a $10,000 day," he said. "If you only had $10,000 in your margin account, you'd have to sit down and write a check. You can see $10,000 disappear overnight."

On an unusual day, he said, he might get four phone calls a day from his broker seeking additional margin. "But usually, the margin calls come in the mail, in a little blue envelope," he said. "You don't have to open it to know what it is."

[niranthara]

With all their hard work and energy diverted towards agriculture, farmers know how to control their crops but have no control over the market that holds their money. The farmers are just much too small to have any control over the market price for their crops. Since even the present price is so unpredictable, various farmers meet at the ‘commodity futures trading commission’ to set the prices for future production. This is a place for both producers and sellers to meet and lock prices for crops before they are harvested. Even with this, only very little security is assured.

Locking in the price at the futures market can have its advantages and disadvantages for farmers, consumers and sellers. The futures market is built completely on the supply and demand of the crop. For the farmers the futures market is an opportunity to set the prices at a rate according to an estimated demand. This way they escape the risk of the prices falling before the crops are harvested. This was the idea behind the futures market, but it doesn’t seem to work that way.

When I googled the word futures market and then refined it, the word speculators caught my eyed. It was also the most common. Obviously there are the intimate buyers and sellers but there are others who use the futures market to speculate the volatility. Although they don’t really demand any of the crops they act like they do, increasing the prices. They are not only creating a “fake demand,” they are also creating a chance for volatility. The demand wouldn’t exist when the produced crops are to be sold and the speculators have moved on. Now the loss is for the person at the spot market or the cash market who bought a crop at the price it isn’t demanded for.

Now moving to the farmers, their loss comes when they have locked a price in the futures market but fail to produce their crops. either becasue of bad wheather conditions or a bad harvest, they will lose a lot of money. to make up for the buyers loss, they will have to buy from the cash market and resell it in the futures market. It is for sure that they wouldn’t get a good enough profit. In instances like this where the farmer has failed to produce a crop and decides to change his mind on selling, the future market forces them to pay a margin. This margin would make them rethink moving out of the deal. This also makes it more secure for both the farmer and the cash market seller.

The volatility in the market for crops is not only because of the futures market. There is also a lot to do with the production of bio fuels. Bio fuels come from some a mixture of various crops that we also use to eat. With this environment friendly gas becoming more popular, farmers are producing crops more for the production of bio fuel than for eating purposes. With the demand for food still at the same, the supply reduced and therefore increases the demand.

With the people of India and china becoming wealthier, more people are able to afford food. This obviously increases the demand, in turn increasing the prices of crops used for eating purposes.

The volatility of the market prices is too big of a thing for an individual farmer to handle, so what can they do to have more control?

If farmers form large unions around the world, there is a much less chance of them being exploited by speculators. Together they will also have more control over the market prices than as individual farmers. They will also be able to support and share each others losses and benefits. A more secure futures market should be formed where the only participants are intimate farmers and sellers.
as i was goign thorough i also could'nt understand how buying and selling without the 'futures market' would affect anyone negatively?

Crops are a very hard commodity to have control over because of its direct connection with the environment and people, but their prices are even more unpredictable.

[jungkyu]

To summarize this long article, it is basically about a story of a farmer Fred Grieder, how the crop market of U.S work, and how the farmers are facing lots and lots of difficulties and disadvantages due to the unreliable and volatile crop market- whereas a certain group in the crop market benefits; the traders or elavator owner. Before, which was 50 years back, farmers would not have any difficulties and disadvantages as a result of volatile, and unstable corp market. However, the crop prices now is volatile and less reliable. The reason is, now the traders pay the cash to the farmer before the crop is harvested. If you look at this generally, it seems like the farmers are having the benefits becuase the farmers don't have to risk for any unpredictable catastrophe or the slump of the crop price. However, their trade options are such that traders benefit more. As the price of a crop is fixed, where the traders are buying the crop before the harvest, the traders also add the insurance premium and the costs of hedge ; which are rising and becoming more and more expensive, to the trading price, which eventually increases the price of a crop, however the farmers have to pay for all that. Accordingly, whats left to the farmer is quite less in contrast to their labors and hardships. Moreover, this results the crop price to soar, which affects both the farmer and the consumer; the consumer eventually pays for all the costs that are added to the usual crop price, on the other hand benefits the traders. Therefore, the farmers are lobbying to the officials at Chicago and Washington. Consequently, they would reset the crop price which will help the farmers. Nevertheless, others also join the crop market. They are the funds, the banks who loans money to the elavator owners- since they need money to buy the crop from the farmers. This again affects the crop price, which ends up the crop price to be volatile and less reliable.

I was first confused with the system of the crop markets, and other economic terms such as 'hedge' or 'liquidity' or 'supply and demand' or 'insurance premiums' and some more. Thus, I had to go to the dictionary to understand the full term. However, this wasn't the only problem I had to face. I also had to know how the crop market had worked out. Anyway, this was a good experience in encountering how the global economy had worked.

The questions I had come across were: 'why did the system change from 50 years back to now?'( the trading system -hedge and harvesting and all that) 'Why aren't the government or commission putting some more effort to fix the system?'

I think the farmers will have to face more and more difficulties towards the future, and would have completely no control over their crop prices. However, the bank will gain more money as they loan the elavator owners.

This article, in fact, had shocked me a lot, which the farmers' labors and hardship ends up being nothing. Accordingly, why aren't the farmers quit being a farmer? If farmers quit to be a farmer, who are going make the corns and wheats and other crops we eat daily? It's just so sad to know that people are taking the advantage of these farmers.

[priyankajohn]

The Article titled 'As crop prices rise, farmers face volatile risks in futures market' by Diana B.Henriques gives an insight into the the evolving challenges faced by large farmers in the United States of America. According to the author, farmers in the US today have challenges which go way beyond the ones faced by traditional farmers.

The regular problems of plowing the fields, planting, fertilizing and fighting a range of pests and adverse weather conditions has now been extended by the need for farmers in US to not just understand the uncertainties of the comodities trading market but also develop new skills to trade in complex futures.The article goes into detail on the vagaries of the comodities market and how the US farmer today faces new challenges and large investments as a result of having to deal with this new dimension of the market.

The farmer in the US today grows crops based on his reading of futures being traded in the commodities market and no more on the basis of simple consumer demand and need.

Though this a direct result of modern day developments (commodities market, futures trading etc) I am puzzled by this topic and its relevance to developing nations.

I wonder if farmers in developing nations such as India and China even understand the concept of commodities markets.The article refers to an American farmer called Fred Grieder and his challenges with the commodities market.I wonder with a farm size of '1500 Acres' what relevance Fred Grieder's trials and tribulations could have to 'developing nations'.

Almost every day, when you open an Indian news paper, you read horror stories of Indian farmers committing suicide along with their entire famillies - because they were unable to repay tiny sums (relative to numbers quoted in the article by Ms.Henriques) borrowed by them. Today in a developing country like India this has become a huge challenge and concern for the Government and the people.

Though the challenge faced by Fred Grieder is very interesting, it would be more facinating to study the problems of the farmer in a developing nation called India.

[kwangsampark]

The article is basically about farmers suffering from the increase of the food prices such as corn, wheat, soybeans and etc. Lots of farmers are protesting to fix a system that reduce uncertainty for food producers.

Prices for lot of farmers are increasing and the rate of money is making the crops more competitive. And these growing prices are damaging the tools that had helped the farmers to prevent the prices from increasing. The financial tools like future contracts and options helped farmers to cope with the volatility in the past. Some of the farmers cope with it by refusing to buy crops.

Future contracts are agreements to buy crops or sell an amount of crops in a certain fixed price. And nowadays, another tool is rising, which is options on those future contracts. This particular tool, farmers do not have to pay as much money as trade futures. Many farmers blame the investment, but money that is invested actually help to reduce price volatility.

As prices of the crops grow, farmers have to invest more of their money on the prevention of the volatility. However, the finacial tools that they used to use, does not work anymore due to the price expence and being less reliable.

The government should help the farmers by setting a system that reduces the uncertainty of food. By setting the system that helps the price to be stable, farmers will not be influenced and not suffer from the price going up and down. For most, consumers will not suffer from it. I was not sure of what they meant when they said that the money that investors invest actually reduce price volatility.

I can relate this to the artilce I read last weekend. Last weekend the article that I read was also about the prices increasing and that the western countries were going to use biofuels instead of fossil fuels. The price of the crops were increasing because the oil price was increasing and that has affected the price of crops. Due to this, lots of farmers were going through hard time. Like wise, in this article, because of the increase in the price, farmers are having difficulties and the finacial tools can be no help to them anymore because they too are getting more expensive. In conclusion, unstability of prices of the crop is bringing several disasters to farmers and in the end also to consumers.

[hisu]

This article is very interesting and confusing at certain parts. There are so many factors that lead to the unstablity of the market, but what I don't understand is why are farmers losing money all of a sudden? Except for buying things to produce the crops. Another thing I want to know is. Why would farmers lose more money when crop prices are increasing? I know that many things that used to be cheaper are getting more expensive. For example, gas prices. Many farms have started to use machines to harvest crops. Food prices are higher than it has ever been. But why would the farmer be suffering, they should be happier than ever. More money. I remember reading articles about food demands raising the price of crops. I also remember reading from the article that farmers could still make the same money off of their crops even when the prices were unstable by trading with different markets, but now I don't understand why thats not working anymore. Some people can't take the pressure anymore and are quiting their jobs for something more stable. But with these demands for more food, even one farmer quitting his job could prove criticial. I think that the bigger organizations all around the world should step in and help stable the big factors out such as the stock market and the oil prices. If the stock markets became stable again all the markets would be more stable and things would be better. Well atleast thats what I think.

[sparsh]

After reading this a few times my reaction was still “WHAT?”

What I did understand is that this article is talking about the farmers like in the United States of America and the risks they have in the commodity market. Especially commodities like corn, soybeans and wheat market.
These risks are basically about the crop prices in the states. The prices are not stable at all. The farmers can lose a lot of money or make a lot of money but it’s not reliable. The reason that crop prices are not that reliable is because now the traders pay the money to the farmer before the crop is harvested not after.
It is like what we read in the book. Actually it’s a lot like what we read in the book.
As the prices of crops increase, farmers have to invest more of their money on the avoidance of the volatility.

I do have a lot of questions after reading this long, confusing and interesting article. Like Hisu mentioned, “Why would farmers lose more money when crop prices are increasing?” They should be making more money not losing.

I have read quite a few articles that talk about farmers committing suicide because of the stress in their jobs. I read one article in dnaindia.com. It said that there was a farmer committing suicide every 8 hours in small towns in Maharashtra. All of these farmers committed suicide because of their stress in their jobs. The money they have to pay for the machinery or whatever they need to grow the crops are more expensive than the selling price of those crops. So the farmers are losing all their money and committing suicide.

I feel really bad for these poor farmers who cant do anything because they have devoted all of their time and money into their farms and now have no choice because the increase in crop prices.
I agree this article was long and very hard to understand but the parts I did understand really gave me an idea. I wish we do more articles like this (maybe not so long and s many fancy words)  Overall it was a good read.

[rmanu]

Farmers in the US are facing tribulations because crop prices are unstable, they some time increase or decrease. This tribulation is almost making farmers leave this job or suicide because it can get them lots of money or they get small amount of money.I think due to this volatile, farmers in the US will quit farming or suicide. Why are crop prices increasing? Is it because it is hard farming them? Now, why are crops unreliable? What is the system that was used in the 1950's? Why is the system breaking down now? What was the reason that made the system work well in the 1950's? Farming is like gambling. It is a difficult job because it is a job that gives you a lot of money or it doesn’t even give you money. If there is no weather threat or threats like this then farmers will gain lots of money, if there are threats like these then you are bankrupt or it is a loss.

[maimoona]

As crop prices rise, farmers face volatile risks in the future market
Maimoona
This article is about one of the hardest ones I have read, and still a very interesting one as well. Well this article is basically talking about the farmers from different parts in the United States are facing problems due to the rise of crop rise in the future markets, they either lose money or gain money. Well though it can give a positive impact towards this, it can still be negative, I still don’t understand why though. There are different farmers, from different parts of the states coming together, and having meeting discussing, on how they can reduce this act. There are a lot of people investing money in the crop farming. The crops that have been in business are wheat, corn and soy beans. The people depending on this farming act are less reliable, and due to the cash market, where the grain is actually sold. There are as well a lot of environmental challenges that the farmers are facing.

After this entire article was an interesting piece of information to share, and talk about. I think that this is a very interesting article though I had tough time understanding it, I still tried m best in doing it, and this is all I could.

[asifhilal]

Farming is just not what it used to be. From 1959 farmers had a system to help them be stable. But now, that system has just broken down. Farmers can no longer “lock” the price of a crop. Once planted, they have no control over their crops. This ruins their pay.
Now to answer the killer question everyone asked. If prices go up, then how do farmers lose? Here is an example: Let’s say corn is worth 4$. Production of that corn costs 3.30$ per bushel. So the farmer gains 0.70$. However, when corn prices rise to 4.50$, the production also rises. So now the production cost is 4.10$ per bushel. Now the farmers profit is only 0.40$, and they get 0.30$ less than before. (Information is not accurate-for example purposes only)
So this is a very serious issue for farmers, and farmers are thinking more about their crop prices than their crops. The crop prices and production prices have to become more stable. I really can’t think of a solution, but everyone should try to help.

[zachghaderi]

This article really put into perspective how much of a risky business the farming industry is. They farm and slave and put in these long hours to not even know if it will pay off. Well it seems it at least used to be like that a few years ago with the hedging tools so farmers were guaranteed a little piece of satisfaction with what they did. It really is too bad that they aren¡¦t able to do that now that the price of the commodity goes up. I was a little puzzled like Sparsh as to why the farmers were loosing money and investors and traders were pulling out if the price was going up. Was it because the prices for consumers were just too high for anyone to pay, so there is a huge surplus with no buyers??

My mom¡¦s side of the family has always been farmers. Her mom and dad came from farming families and so one and so forth from each of them all the way back to when they came from Ireland tons of years ago and they were probably farming over there too. But I never really appreciated how much they worked and prayed. I mean, I worked out in the fields (just like every good grandsonƒº) but it was kind of ¡§behind the curtain¡¨ as to how the financial standings were¡¨ this article showed me how hard a life it is for the farmers and families of farmers.

Because of this article I¡¦m gonna email my grandma and grandpa and tell them I love them

[zachghaderi]

(im just gonna thro this out there. this is about hte 3rd time tht iv copied and pasted from a word document into this forum and it messes up my type, throwin weird symbols at my quotations and wat not...so im just throwin that out there.

[sanjayvdasari]

*Phew*

That was one long article. On a side note Mr. Hewett, how about finding a shorter one next time.

Well now, getting down to the article, it was confusing, and interesting at the same time. A combination I often found hard to come by.

The article was about how the farmers were losing money, or gaining money very quickly and unreliably. AS you all know, farming is a very dangerous and unsafe job. Therefore, because of fluctuating crop prices, farmers are suddenly getting a lot of money one harvest then losing that and more the next.

The volatility of crop prices has gone WAY up even though a system was designed some time back to avoid uncertainty for the farmers. Another problem that farmers will face is the growth of the commodities prices. They wont be able to buy basic items that they would normally need even if they had a good harvest, but a bad income from it because of the fluctuating market. Also, since the cost of oil has gone up, farmers with huge farms will need that bit of extra money to buy oil for their machines, which will cause some problems.

Though the system that is supposedly bringing down the uncertainty of prices for the farmers since 1959, only recently had it begun to waver. It has become so bad that the very people who had once relied so much on the ‘explicit system’ to tell them what the price of their crop will be next harvest have lost confidence in it. Any extra money that the farmers make one day, they can watch disappear the next. This is all because of the unstable and slightly annoying market prices.


A question I’d like to ask, is why hasn’t the system changed since when it was made, why doesn’t it work anymore, what happened?

To wrap up, I’d like to say that farmers are pretty much in deep nuts right now, and they need some help. Now what way that help would come, I have pretty much no idea, but we should try anyway.

[xxlyra]

I won't bother summarising this article - it's been done already, so to avoid redundancy, I shall move straight to the point:
a solution.

The instability of today's market is a complicated problem to explain, but the fact that many of the guidelines the Chicago Board of Trade utilises are terribly outdated could be part of the explanation to this. As we saw in the article about the Thai organisation meeting monthly for a discussion of weather, food, and world economy over tea, old methods are now starting to show their age. The world has changed, so why hasn't these methods and guidelines for stabilisation and ensurance of good trade? To arrive at a better situation, influential institutes everywhere witnessing this chaos must reform and adapt to the times today. We are not in the 1950's anymore, so why should these rules be?

Another potential catalyst to arriving at a solution would be to engage more farmers in this problem. Grieder is a good example, but one can imagine not many other farmers are as enthusiastic in participating to have an influence on their future - the thing is, right now we need farmers that are business wo/men, not peasants. Only that way can we just hope to achieve a balance of power between the traders and the farmers at the Chicago Board of Trade.

Something else that might help would be for the bigger organisations surrounding and/or superceeding the C.B.T. to take a look at the root causes of the rise of food prices and then combat those. Taking a look at overpopulation, for example, and then trying to start some sustainable projects to support the eradication of this problem, would be a fantastic ideas for these groups who certainly have the money. This would be an alternative yet effective way to stabilise prices, and it would also earn these organisations some positive PR and general goodwill; something nearly all trade-centered groups could benefit from, considering their dubious reputation.

I hope these ideas for working towards a solution have been a fresh breath of wind from the usual analyses and summaries. All hail un-monotomy.

[jozefien]

Although we have discussed this article in class, it remains very difficult and hard for me to understand it. Basically it was about the volatility of the crops market in the US. Nowadays rising food prices are a big issue; almost everyday we are confronted with a new aspect of this very serious problem. The volatility of the crop prices in the US is one of the many things that are related to this big issue. The fact that crop prices are becoming more volatile may seem only a problem for the farmers, but actually we, as consumers, as well face problems due to this. Volatile prices give farmers worries because it makes it really hard for them to loch their prices, as a result they need to invest more in methods that try to stabilize the prices; this does not only give them a smaller profit margin, the extra money spent on stabilizers is also moved to the consumers of the finished products.

In the past farmers were able to lock the prices of their crops with the help of the Chicago Board Of Trade, but nowadays this becomes more and more difficult.
Locking or hatching prices for crops is a process that ensures the farmers that they get a good price for their crops, and that they make profits. Usually this is done by future contracts; these are agreements between farmers and buyers which decide the price and quantity that will be sold. These future contracts are often made a long time in advance sometimes one or even two years. Another way of hatching the prices is taking an option on these future contracts, this means that the buyer or the farmer have the choice if they want the future contract to happen or not, this decreases the risks of volatile prices less than future contracts, but the method still works and it costs the farmers less money. Since the crop prices become more volatile, farmers now want to try to make more and more use of these methods. However, future contracts become also more expensive.
So even though the prices the farmers can ask for their crops rise, they themselves also have to invest more in insurance premiums, trading in options, and future contracts. This was completely new for me; normally we think that when the price of a product rises the producer gets more money, but in this case the inverse happens; farmers are having a really tough time.
Due to the higher volatility of the prices some crop elevators do not want to trade in option or with future contracts anymore. This makes it extremely hard for the framers to lock their prices and have a safe future.
Something that I didn’t really get is how future contacts are sometimes not reliable anymore. I don’t know how it is related to the cash market and why it is bad for the farmers.
After reading this article I was shocked by the amount of work and effort farmers put in their business, and how their profits are so small or non-existent. I think that in the past the job of framer was “easier”, in such a way that they didn’t had to worry about the economy that much. Nowadays the global economy has become so complicated that even the people that stand really close to sometimes don’t get how it works.

[keisuke]

well i know im very late to tunr in this current event or what ever we call it. lol
well this was very interesting but in the other way it was really hard to understand.
well it first talked about how the farmers were struggling with the increase of the food price like rice, wheat, corn etc. it also talked about that many famers are having a life by farming and becoming like slaves. thanks to the cash market these product that the were farming are going up and they are losing maoney but in the other hand some farmers are gaining money since their product was ver usuful.
In the old days farmers were trading a lot with other people around the world but these days those types of trading are not occuring so i dont know whats going on with that.

As many people knows in acient Japanese times all the japanese were relying on farming inorder to live. As for now this process still keeps on going, my grandmother (my father's side) owns a big spot to farm, my grandmother always tells me that it is fun going farming everyday since as much they work it will make other people wat healthy food and be healthy. but i dont know why she doesnt rest once in a while since she needs to rest sometimes.

anyway, while reading this article i remembered what my grandmother was talking about.
but back to the article i still dont understand what the Chicago Board of trade wants to do with anything, and what they are trying to do.

p.s. im sorry my post was really late mr. hewett, next time i wont forget to do it

[tamsin]

im sorry its late!

it must be very fusterating for this farmers to have to deal with the increase on the food prices. The crop prices and the fall and rise of the commodity market are particularly irregular.
the system for these farmers are derailed, and are not working as efficiently as they were, when it all started. The famers are working extra hard, that they are pracitcly turning them selves in to slaves, hoping that it would pay off. the system that was extablished in 1959 was supposed to help the farmers be stabilized, but now, this system just isnt working as well for them. The farmers face complexity and inconvenience due to the defective and unstable crop market. due to the volitile in the US,

farmers will either quite, or simply kill them selves, due desperation. these farmers will either go broke, or cash in a lot of money. farming is so undpredictable that the tables could turn both ways for farmers. new rules must be set to protect failing farmers. i totally agree with what lyra had said, the law may have worked in the 50s, but were in 2008, and changes have been significant, its time for a new law to be extablished to finalise a stable market.

[olivia]

Curent Event

Farmers from different areas in the United states, are losing alot of money, and investments because of the unstable risks in the commodity market as with the crop prices becoming very unpredictible, so farmers can invest alot of money, and then lose alot of money in a short period of time.
Such commodities include corn, rice, and wheat, very common food items in the commodity market, which is why it is hard for farmers to adjust to the changes in prices.
Farmers had been succesfull in following this system, but it has nearly been drastically abolished, leaving farmers in tough situations and with the reading talking about farmers living like slaves, to keep up with the market. It has become quite hard for farmers to deal with, so many farmers resulted to this problem by ending thier lives, which is a devastating side affect.
These farmers are working so hard, to satisfy the consumer population, but why arnt they credited for it as well as the most definitly should be?
Chicago, which is one of the main cities affected by these changes, need to get the Board of trade to think of smart ideas to solve this disaster before more worse side effects happen to occur, not only in Chicago, but in countries all over the globe.
This was an interesting article, a bit hard to follow at times, but very satisfactory.