Agri NW Jongboer - Senwes Tuisblad

54 ••• DEvElopiNG aGricUlTUrE
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Grain hedging
continued from page 53
note that when there is a gain on one market position,
there is a comparable loss on the other position.
this explains why hedging is often said to lock
in a price level. it established a selling price of
r1 100 per ton for maize to be delivered in August.
With a short hedge, you give up the opportunity
to benefit from a price increase to obtain protection
against a price decrease.
a lonG HEDGE
on the other hand, livestock feeders need protection
against rising grain prices and would instead
use a long hedge involving an initial long future
position.
Assume it is july and as a livestock producer you
are planning to buy maize in december. the cash
market price in july for maize to be delivered in
december is r1 100, but you are concerned that by
Graanprysrisikobestuur:
Wat is ‘n meesterverskansingsplan?
Vra vir Frans
www.franslyons.co.za, skakel of sms
Frans direk by 082 554 2382
the time you make the purchase, the price may be
much higher. to protect yourself against a possible
price increase, you buy december maize futures at
r1 100. if the price increases, the higher cost in
the cash market would be offset by a gain in the
futures market.
WHaT To Do?
once the hedging concept has been understood, the
producer has to approach a commodity broker who
will assist in increasing the producer’s understanding
of the market mechanics, types of orders to place
and with the opening of a hedge account. S
>>
Sipho Lowane is an Agricultural Economist and Coordinator
at Senwes Agricultural Services. Contact him at sipho.lowane
@senwes.co.za or (018) 464-7378.
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