The Rural Voice, 1987-04, Page 35support, as futures markets are cur-
rently trading at significant discounts
to cash.
**HEDGERS** should have two
areas of concern:
1. Product pricing
— live cattle futures
— basis risk (i.e. Canadian dollar risk)
2. Input pricing
— feed costs
— replacement cattle costs
— interest rate risk
Of these hedgeable price risks I would
suggest that the Canadian dollar and
replacement cattle costs should be the
two most pressing concerns to live-
stock producers at this moment.
Live Hogs —
A fairly choppy month concluded
with June hogs finishing 2.65 higher
to close at 47.70. The Quarterly Hogs
and Pigs report due out on March 31
has had everyone guessing. Most tra-
ders expect to see indications of build-
ups, but recent strength in the market
might suggest that the buildups may
not be that burdensome as yet. Trad-
ing activity indicates that traders are
not looking for a significant summer
rally, with summer futures prices
trading no higher than 2.00 over April
future levels.
**HEDGERS** would have
similar price risks as mentioned in
my comments about cattle. Some
analysts predict that the mid-May/June
time frame might provide some excel-
lent opportunities to hedge late sum-
mer, fall, and beyond production.
Just a Word About
... U.S. Politics
and Ag Options
Recently I've noticed a couple of ar-
ticles in major financial publications
saying that U.S. govemment advisors
are pointing to agricultural options as
a replacement for government -guaran-
teed support prices. While articles like
this can only do the option market
good — more participants means more
liquidity — I suspect it will be a while
before the U.S. government will be
clear of farm support/subsidization
programs. In the meantime, I believe
producers should look upon options as
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The information contained herein
is believed to be accurate; however
Bache Securities Inc. assumes no
responsibility for its use. For specific
recommendations and suggestions
regarding stop orders, contact your
nearest Bache office.
David Clarke is a futures contract
supervisor with the investment firm
of Bache Securities Inc., 200-376
Richmond Street, London, Ontario,
N6A 3C7, phone 1-800-265-1570.
APRIL 1987 33