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PROCHAIN ÉVÉNEMENT
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Managing market risk has never been more important for farmers than it is now. And it is vital for farm managers to have a good understanding of the risk management tools that are available. “Managing Market Risk” is an at-home study guide that will provide a good, basic understanding of futures, options and cash markets. Clear examples of each along with definitions of terminology are provided.

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Table of Contents

Introduction to Managing Market Risk

Understanding Market Risk on the Farm

* 1.0 Objectives of this Chapter
* 1.1 The Nature of Market Risk in Agriculture
* 1.2 Types of Market Risk
* 1.2.1 Price Risk
* 1.2.2 Gross Margin Risk
* 1.2.3 Cash Flow Risk
* 1.2.4 Financial Risk
* 1.3 Chapter Summary
* Market Risk Quiz

Futures Markets

* 2.0 Objectives of this Chapter
* 2.1 Development of Futures Markets
* 2.2 What is a Futures Market?
* 2.3 The Futures Contract
* 2.4 The Standardized Futures Contract
* 2.5 Forward Versus Futures Contracts
* 2.6 Attributes of a Futures Market
* 2.7 Long and Short
* 2.8 The Link Between Cash and Futures Markets
* 2.8.1 Threat of Delivery
* 2.8.2 The Cash Settled Contract
* 2.9 The Margining Process
* 2.10 Closing Out A Futures Position
* 2.11 The Mechanics of a Simple Hedge
* 2.11.1ShortHedge
* 2.11.2 Long Hedge
* 2.12 Chapter Summary
* Futures Market Quiz
* Hedge Exercises

Basis

* 3.0 Objectives of this Chapter
* 3.1 The Concept ofBasis
* 3.2 Basis for Livestock
* 3.3 Basis for Grains and Oilseeds
* 3.3.1 Carrying Charge Markets
* 3.3.1.1 Inverted Markets
* 3.3.2 Transfer Costs
* 3.3.3 Basis and Threat of Delivery
* 3.4 Basis Variability
* 3.5 Calculating Basis
* 3.6 Basis Quotes – Adjusted and Unadjusted Basis
* 3.7 Chapter Summary
* Basis Quiz
* Basis Exercise

Options

* 4.0 Objectives of this Chapter
* 4.1 An Example from the Private Sector
* 4.2 Components of an Option on Futures
* 4.3 Exchange Traded Options on Futures
* 4.4 Option Rights and Obligations
* 4.5 Determination of Premium Value
* 4.5.1 Time Decay
* 4.6 Options Classifications
* 4.7 Closing Out an Option Position
* 4.8 How do Options Work?
* 4.9 Chapter Summary
* Options Quiz
* Options Exercise

Hedging with Futures and Options

* 5.0 Objectives of this Chapter
* 5.1 Hedging with Futures & Options Markets
* 5.2 Examples
* 5.2.1 Short Hedge – Live Cattle Example – Decline in Price
* 5.2.2 Short Hedge – Live Cattle Example – Rise in Price
* 5.2.3 Short Hedge – Hog Example – Decline in Price
* 5.2.4 Short Hedge – Hog Example – Rise in Price
* 5.2.5 Long Hedge – Feeding Barley – Rise in Price
* 5.2.6 Long Hedge – Feeding Corn – Rise in Price
* 5.2.7 Short Hedge Corn Example – Decline in Price
* 5.2.8 Short Hedge – Corn Example – Rise in Price
* 5.2.9 Short Hedge – Beans Example – Decline in Price
* 5.2.10 Short Hedge – Beans Example – Rise in Price
* 5.2.11 Short Hedge – Barley Example – Decline in Price
* 5.2.12 Short Hedge – Barley Example – Rise in Price
* 5.2.13 Short Hedge – Canola Example – Decline in Price
* 5.2.14 Short Hedge – Canola Example – Rise in Price
* 5.3 Yield Risk and Hedging
* 5.4 Chapter Summary
* Hedging Quiz

Managing Exchange Rate Risk

* 6.0 Objectives of this Chapter
* 6.1 Introduction
* 6.2 Exchange Rate and the Short Commodity Hedger
* 6.3 Canadian Exchange Rate Risk
* 6.31 Determining Your Canadian Dollar Hedge Requirement
* 6.4 Exchange Risk and a Short Commodity Hedge
* 6.5 Exchange Rate and the Long Commodity Hedger
* 6.6 Hedging Exchange Rate Risk With Options
* 6.7 Chapter Summary
* Exchange Rate Risk Quiz

Cash Market Contracts

* 7.0 Objectives of this Chapter
* 7.1 Key Business Events
* 7.2 Overview and Evaluation of Main Types of Contracts
* 7.21 Deferred Delivery/Forward Contract (Sale)
* 7.2.1.1 Deferred Delivery/Forward Contract (Procurement)
* 7.2.2 Basis Contracts
* 7.2.3 Grain Pricing Order
* 7.2.4 Delayed or Deferred Pricing (90 day tickets-Westem Canada)
* 7.2.5 Hedge to Arrive/Futures Only Contracts
* 7.2.6 Deferred Payment
* 7.2.7 Bank Swaps – Managing Foreign Exchange Risk
* 7.3 Chapter Summary
* Cash Market Quiz

Summary Comments

* 8.0 Futures, Options and Cash Market Tools
* 8.1 Protecting Against Lower Commodity Prices
* 8.1.1 A Comparison with Cash Markets
* 8.2 Protecting Against Higher Input Costs
* 8.2.1 A Comparison with Cash Markets
* 8.3 Risk Management – The First Steps
* 8.4 Summary
* Tools For Protection From Price Declines
* Tools For Protection From Rising Prices

Exercise/Qiz Answers Glossary Appendix – Future/Option Contract Specs

* (CBOT) CORN FUTURES
* (CBOT) SOYBEANS FUTURES
* (CME) CANADIAN DOLLAR FUTURES
* (CME) FEEDER CATTLE FUTURES
* (CME)LEANHOG FUTURES
* (CME) LIVE CATTLE FUTURES
* (WCE) CANOLA FUTURES
* (WCE) WESTERN BARLEY FUTURES
* (CBOT) OPTIONS ON CORN FUTURES
* (CBOT) OPTIONS ON SOYBEAN FUTURES
* (WCE) OPTIONS ON WESTERN BARLEY FUTURES
* (WCE) OPTIONS ON CANOLA FUTURES
* (CME) OPTIONS ON LIVE CATTLE FUTURES
* (CME) OPTIONS ON CANADIAN DOLLAR FUTURES
* (CME) OPTIONS ON LEAN HOG FUTURES
* (CME) OPTIONS ON FEEDER CATTLE FUTURES