(3) Marketing Practices to Reduce The Risk of Price Fluctuation

These flashcards cover key vocabulary related to marketing practices and hedging in price fluctuation management.

Hedging

A strategy used to protect against price fluctuations that could negatively affect income or commodity value.

Cash Market

The local market where agricultural producers sell their commodities.

Futures Market

A market where the risk of price variation is offset, typically involving contracts for future delivery.

Basis

The difference between cash market and futures market prices, representing transportation, storage, and interest expenses.

Long Position

A position held by a buyer in the futures market, signifying an intention to buy commodities in the future.

Short Position

A position held by a seller in the futures market, signifying an intention to sell commodities in the future.

Net Price Received

The final price received per bushel after accounting for both cash market losses and gains in the futures market.

Futures Contract

A legal agreement to buy or sell a commodity at a predetermined future date and price.

Widening Basis

A situation where the difference between the cash price and futures price increases.

Narrowing Basis

A situation where the difference between the cash price and futures price decreases.