EC SD | white shadow - 1/25/2024 22:44
I have to agree with w1891 because it is the facts. ADM was within weeks of not buying grain in 2009 because of a lack of cash to cover hedges. The commercial industry will buy the front month to bring in the spread to try to get grain to town, I don't consider that manipulation. Remember, to get grain to town a commercial will use basis first, spreads second, futures last.
As for as risk, I have never dealt with a company more risk averse than ADM. They do not speculate period. That is why they don't even like to price grain when the market is not open. Speculation ruins careers and corporate entities just don't tolerate it on a large scale. They might have some gambling stocks room in volumes, but they are very small, and you better be right. Some managers are given some rope, with the note attached not to hang yourself with it. Most gambling energies are in the spreads to move grain to town.
Commercials are basis traders; they don't really care that much about futures price because they operate hedged.
Honestly, I hope you are both right on this topic. I do agree that here in the USA, you both have described it correctly - because on-farm storage is so well-established...
I looked at the 10K for ADM and they reveal their hedging risks and accounting practices. It does allow for "hedging ahead" of having physical and then matching it up later. If they gain or lose on the hedge, they defer the gain/loss to a future accounting period when they do have the physical.
Now is "hedging ahead" a market manipulation? Certainly not for producers, end-users, and small commercials that cannot possibly move the market. How about for the agri-business giants that do business in the multi-billions? I don't have blind trust for their behaviors.. |
Soybeans?? Why
