By Jeff Caldwell, Multimedia Editor
Avoid selling at the harvest low? Check. Know the difference between an option spread and straddle? Check. Now for the big question. Can you make it all yield in-the-black results on your farm’s balance sheet? That’s the sought-after end result, though there are many ways to reach that point. What works for one farm may only complicate matters for the farm just down the road. Farmers threw around some of these An Agriculture Online® Marketing Talk member shares his thoughts on the 2008 crops strategies at the recent Agriculture in his area and marketing strategies at the recent Marketing Talk meeting. Online® Marketing Talk meeting held earlier this fall in West Des Moines, Iowa.
Photographs: John Walter
insurance policy, I’m going to be col- “My brother used to trade options.
lecting a premium. If you just look at Within a year, he stopped doing that.
Making options pay it like an insurance contract, it tends There’s a lot of maneuvering you
Take options, for example. Buying to make it more simple.” have to do every day, and it kept him
options one way or another protects Is yours the type of marketing plan pretty well tied up,” Salzwedel says.
against spreads in price fluctuations, that would benefit from buying op- “I am new to the markets and using
creating a vested interest in price tions? It depends a lot on the size of the Board of Trade, but options
swings provided you’ve purchased your operation, how secure you are seem like a lot of work for very little
a call or put. Either way, keep one in the marketing decisions you make, money. I’m going to stick with trad-
thing in mind: “It’s just another type and how much time you’re able or ing futures, win or lose.”
of insurance,” says Chicago Board of willing to devote to arm’s-length Step onto Ron Nauman’s farm,
Trade (CBOT) options trader Scott marketing. however, and you’ll hear a whole
Shellady. For Wade Salzwedel, for example, other take on options trading. For
“If I want to insure against the options don’t fit into his farm. The Nauman, who farms near Floyd, market going a lot higher, I buy calls. Lakefield, Minnesota, farmer says Iowa, options are a necessary part of If want to insure against market his farm isn’t of a size where using his marketing plan. More important-going a lot lower, I buy puts. If I buy options fits into his marketing plan. ly, the cost of options is one that’s both, I buy the straddle. If I think He has some experience with them, easily justified. absolutely nothing is going to hap- but the past has taught Salzwedel “I’ve been studying them for the pen, I’ll sell both,” Shellady says. “If I he’s just as well off to rely on futures last couple of years, and I think on am buying options, I’m an insurance trading. 1,000 acres, you need to spend about buyer, so I pay a premium. If I’m an $40,000 on options. The majority insurance seller and I’m writing an of banks won’t go along with that.
References:
Archives