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Q: Will F&M Community Bank advance funds to be used for hedging livestock and continue to advance if there are margin calls?


Mon, Jul 25th, 2011
Posted in Ask the Expert

Brian Aberg



A: Markets have never been more volatile. A government report or a disease outbreak can shrink margins to unprofitable levels. Many different marketing tools are available, including hedging, but first you must know your production costs so you can lock in a profit.

 Hedging has a low initial cost but in a rising market, margin calls can be large. When the market is rising, so is the value of the livestock you plan to sell. You will not realize the price increase but you will not get a lower price than the price you locked. If prices fall, your hedge funds account will increase to offset the price you will receive.

 F&M Community Bank cannot predict prices but will fund hedge accounts for farmers that lock in profits.

F & M Community Bank

100 St. Anthony Street N., Preston 507 765 3823

229 Main St. N., Chatfield

507 867 1605

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