Futures
Price Formulation
Futures markets supply the mechansims for long-tem
business planning, which can lead to operational profitability
for farmers, soybean processors, livestock producers and food
manfacturers. Contracts are designed to promote better business
planning more, consistent product quality, consistent service
and increased operational profitability.
Soybean and soybean meal futures price fluctiations are a result
of planting decisions, weather (temperature and percipitation)
and market demand. However, a general soybean price formulation
can be used to construct price estimates.
Soybean Price Formulation
Local
Elevator
- Grade
grain
- Condition
grain
- Store
grain
Sub
termianl Elevator
- Linked
to local elev ator by rail, barge or truck
- Often
do not buy direcly from farmers
- Major
function is to concentrate grain into garge shipments
- Reveal
second public price for grain. Basically the local
elevator price plus transportation and handling
costs
Terminal
Elevator
- Sell
to export markets and processors. Do not buy from
farmers.
- Reveal
third public price for grain. Sub-terminal price
plus transportation and handling costs.
Export
Terminal Elevators:
- Very
concentrated industry. Over half of the United
States export capacity is owned by Cargill, Bunge
and Louis Dreyfus.
- Offer
the export price to comptete in the world market
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