Welcome to Open Range, I’m Susan Allen. Stay tuned because after the break I’ll check in with our field reporter, Greg Martin for the AgriBeef Minute.
I’m Greg Martin with the Open Range AgriBeef Minute.
Hedging. For a lot of cattle producers it has become a valuable tool for their financial operation. Casey Bieroth with AgriBeef Risk Mangement explains.
BIEROTH: We trade futures as contracts on futures exchanges that basically allow you to forward price a commodity. Everything is standardized about the commodity in question other than the price which is negotiated on the open market. So what that allows you to do is in effect sell a product earlier than you normally would.
Bieroth says it really is a risk management tool for people.
BIEROTH: When you take a position on the board you’ll lock in a sales price or a purchase price depending on what side of the transaction you want to be on. The market might be better than that and it might be worse than that when the time actually comes to market your actual physical commodity but in the meantime you don’t have the risk of not knowing what your price might be.
It takes a bit of paperwork to get set up and a group like AgriBeef can help.
BIEROTH: Once we get set up with an account then it’s just a matter of making a plan of how you want to manage your risk and it’s all very easy at that point we’ll handle all the capital requirements of trading a commodity. Once we’re set up with an account it’s a pretty easy process for our customers.
I’m Greg Martin and that’s today’s AgriBeef Minute.
Thanks Greg. Don’t forget Greg will be back each Wednesday with the AgriBeef Minute. Agri Beef Co - Real Families, Great People, Exceptional Beef. I’m Susan Allen.