Reap What You Swap
By BETSY JENSEN
NYT
Stephen, Minn.
I HAVE never purchased a credit-default swap on a collateralized debt obligation. I have never packaged subprime mortgages and sold them to the highest bidder. In fact, I do not even have a home mortgage. I live in the house my grandparents built and passed on to my parents, who eventually passed it on to my husband and me. Someday it will go to my children, when it is their turn.
Still, I am stuck in the middle of this financial overhaul. The Dodd-Frank Wall Street Reform and Consumer Protection Act may be targeted at risk-taking bankers, but the regulations have the potential to change the way I do business on the farm.
I raise mostly wheat and soybeans in northwest Minnesota. Wheat, in particular, is bought and sold in a notoriously volatile market. In February 2008, I sold wheat for $18.69 per bushel. Last month, I was selling it for $3.49 per bushel.
To protect myself from such swings, I use derivatives, or agricultural swaps. I make an arrangement with my local grain elevator or a commodities broker months before my crop is harvested to sell it at a guaranteed price; I have already priced some of the wheat I will raise in 2011 at a decent $7.15 a bushel. Of course, since wildfires in Russia destroyed much of the world’s crop and the country banned the export of grain through December, wheat prices have risen over 45 percent from five weeks ago — a clear sign of how volatile the market can be.
(More here.)
NYT
Stephen, Minn.
I HAVE never purchased a credit-default swap on a collateralized debt obligation. I have never packaged subprime mortgages and sold them to the highest bidder. In fact, I do not even have a home mortgage. I live in the house my grandparents built and passed on to my parents, who eventually passed it on to my husband and me. Someday it will go to my children, when it is their turn.
Still, I am stuck in the middle of this financial overhaul. The Dodd-Frank Wall Street Reform and Consumer Protection Act may be targeted at risk-taking bankers, but the regulations have the potential to change the way I do business on the farm.
I raise mostly wheat and soybeans in northwest Minnesota. Wheat, in particular, is bought and sold in a notoriously volatile market. In February 2008, I sold wheat for $18.69 per bushel. Last month, I was selling it for $3.49 per bushel.
To protect myself from such swings, I use derivatives, or agricultural swaps. I make an arrangement with my local grain elevator or a commodities broker months before my crop is harvested to sell it at a guaranteed price; I have already priced some of the wheat I will raise in 2011 at a decent $7.15 a bushel. Of course, since wildfires in Russia destroyed much of the world’s crop and the country banned the export of grain through December, wheat prices have risen over 45 percent from five weeks ago — a clear sign of how volatile the market can be.
(More here.)
Powered by Blogger
0 Comments:
Post a Comment
<< Home