If used correctly, futures and forward contracting can help make farming more profitable and less risky. After all, a producer's number one goal is to be profitable, and using these techniques can help you achieve these goals. But there are many things you can't control like weather, world events, or supply and demand. These circumstances can have major effects on farming operations. Futures and options can be used in marketing plans and can manage variables to take control of the future of the operation.
Local elevators offer several types of cash marketing alternatives.
Based on the price the elevator is offering, market expectations, and other factors, a producer may choose to use one or all of these cash marketing alternatives. Producers can market on the Chicago Board of Trade to control the markets through a local futures broker. There are two basic types of futures market alternatives for producers selling crops. There is not a correct marketing alternative. Each individual operation has different goals and objectives and these must be weighed and put to the test within comfort level.