Larger Farms More Likely to Utilize Marketing Opportunities
WASHINGTON, DC – When it comes to selling their crop, farmers can choose a futures contract, an options contract, or a marketing contract. Each of the options has benefits and risks though each has been created to allow them to choose how much risk they’re willing to have. With a futures contract, the farmer can lock in a price for a crop not yet harvested. Options allow the farmer to protect against a falling market all while being able to take advantage of a market that increases. Marketing contracts, allow a farmer to select an amount of a crop to deliver with a guaranteed price – usually divorced from any price fluctuations. A recent study by the Economic Research Service found that 58 percent of larger corn and soybean farms choose marketing contracts compared to smaller farms (19 percent). For the smaller operators, very few (less than 5 percent) utilize “the markets” (ie futures and options) to sell their crops. Larger producers on the other hand do utilize the markets, though only 27 percent do so with futures and 13 percent through options.
(SOURCE: All Ag News)