Title

From Price Taker to Price Strategist: Real World Implications of Commodity Hedging on a Farming Operation

Academic Level at Time of Presentation

Senior

Major

Agricultural Business with a Crop Production Emphasis

Minor

Economics

List all Project Mentors & Advisor(s)

Dr. Naveen Musunuru

Presentation Format

Poster Presentation

Abstract/Description

Commodity hedging is growing in demand by farmers, and in general, due to the increased accessibility, education, and need. It is becoming a viable tool to mitigate market risk and transform farmers from having a reactive market approach to having more of a proactive, business mindset approach. For years now, farmers have been notoriously price takers; however, once the farmer implements commodity hedging into his or her operation, he or she becomes a price strategist. Becoming a price strategist, gives the farmer more peace of mind at night, more security, more adaptable/flexible to market changes, and protects profits. In this research, you will find the social, financial, logistical, and marketing aspects that contribute to effective hedging. From understanding the sole operator of the farm to the cash flows to the assets on the farm (like bin storage and tractor depreciation) to the cash market, options market, and futures market- commodity hedging is not a one-size-fits-all and deep deciphering of each farmer and his or her operation needs to be thoroughly conducted to be successful. The purpose of this research is to demonstrate the positive implications of commodity hedging to a farming operation and everything that goes into it. Disclaimer: This research was originally intended to be internal use only within Hurley and Associates, Inc.

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From Price Taker to Price Strategist: Real World Implications of Commodity Hedging on a Farming Operation

Commodity hedging is growing in demand by farmers, and in general, due to the increased accessibility, education, and need. It is becoming a viable tool to mitigate market risk and transform farmers from having a reactive market approach to having more of a proactive, business mindset approach. For years now, farmers have been notoriously price takers; however, once the farmer implements commodity hedging into his or her operation, he or she becomes a price strategist. Becoming a price strategist, gives the farmer more peace of mind at night, more security, more adaptable/flexible to market changes, and protects profits. In this research, you will find the social, financial, logistical, and marketing aspects that contribute to effective hedging. From understanding the sole operator of the farm to the cash flows to the assets on the farm (like bin storage and tractor depreciation) to the cash market, options market, and futures market- commodity hedging is not a one-size-fits-all and deep deciphering of each farmer and his or her operation needs to be thoroughly conducted to be successful. The purpose of this research is to demonstrate the positive implications of commodity hedging to a farming operation and everything that goes into it. Disclaimer: This research was originally intended to be internal use only within Hurley and Associates, Inc.