Futures Prices: The Weapon of Choice in Acreage Battles

The Financial Times reports that farmers are looking to futures prices as they decide which crops to plant:

Keith Phillips, a Missouri farmer, plans ahead. In November he determined how to plant his family’s 7,000 acres this year: mostly corn and soyabeans, with the rest alfalfa and wheat.
But a question mark remains against several hundred acres as he awaits signals from Chicago’s futures markets that could swing them from beans to corn. …

Many farmers have invested in fertiliser and seed and begun selling crops forward on futures markets, making planting plans inflexible.

This is, of course, exactly how it’s supposed to be. It’s always fun to see how mundane economic decisions can be spiced up with a good slogan: the FT headline calls this the “battle for acreage.”

In an article last month, the FT says that Cargill traders call this the “fight for dirt.” In this battle, futures prices determine the winner: “The planting projections will change as forward prices oscillate.”

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