How Will Recent Changes in Commodity Markets Affect Farmers?

 How Will Recent Changes in Commodity Markets Affect Farmers?

I’m KayDee Gilkey with the Market Line Report for May 29, 2012. 

The commodity markets were closed yesterday for the Memorial Day holiday, so today we will be visiting with Washington State University Small Grains Economics Endowed Chair Dr. Randy Fortenberry about the recent event of the Intercontinental Exchange --or ICE-- extending trade into the commodity markets. 

Dr. Fortenberry shares what it might mean farmers and their marketing.

Fortenberry: Well, what it might mean is that some of the liquidity that we’ve seen in the exchanges in the past, which helps facilitate large 

hedge positions when commercial buyers and sellers come in. They then use those positions to offer prices back to farmers. That liquidity might now be spread across a couple of different exchanges and if it becomes relatively thin -- in other words, liquidity starts to disappear because we are trading in two different markets. What it might mean is even more volatile price changes in a given trading day then those that we’ve seen over the last three or four years. In the last three or four years we’ve seen record volatility.”

He says it will be important for farmers to recognize the need to move quickly on attractive forwarding prices. 

Fortenberry: “What they probably need to recognize is when they see an attractive price - for forwarding pricing on whatever they are producing either storing or getting ready to  harvest. That price may be around for less time than it has in the past. You won’t maybe have a lot of time to think about it. So it is important to understand what price you are willing to accept and then when the market offers you that you need to pull the trigger.”

I’m KayDee Gilkey with the Market Line Report on the Northwest Ag Information Network.