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Leesburg, Ohio | No, I am NOT saying that Cattlemen who are concerned about how the market is operating today are looney. I share that concern, especially as delivery points, or the possibility of any delivery, is removed from more commodity contracts, livestock or otherwise.
I AM saying that we still need the futures market as a price-discovery and risk-reducing mechanism in a widely dispersed production system, and that the presence of "evil" speculators/funds/day-traders is ESSENTIAL to a system with good liquidity and price-discovery qualities.
Forcing every participant to keep contracts for months??? Really??? Talk about an artificial impediment to the marketplace!!! It sounds like some would restrict participation only to producers. Most producers are hedgers. There is not always a plentiful supply of end-users in the marketplace for every period a producer needs to hedge, and vice-versa. That is an example of the need for specs and arbitrage...they provide the marketplace with the liquidity to be able to handle all the hedges (from either the production or the purchasing sides of the business) as the need arises, not after waiting for the next month to roll by.
Think about what it might be like when you have a pen going on feed, if there were no futures. Yes, you could call around the region and gather cash forward bids, if buyers were willing to bid out that far. You could listen to the cash market reports. But how could you lock in a price, if there were no cash bids right now for a pen of cattle that will not be ready to slaughter until this fall? Yes, there are certainly differences in basis, but as it is, we can call the broker, place a hedge order, and set a price that we can live with, less the basis. Without that ability, WE BECOME THE SPECULATOR. | |
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Board of trade hater's what is your suggestion?
