Farmer pov Flashcards
If a farrmer doesnt produce what he wants to
He honours the tonnes he can’t supply by washing out (buying back) or buying in an additional tonnage to cover.
If investors believe that the price of a particular commodity will fall in the future…
They will sell short.
What is selling short?
selling futures now to buy back in the future
Why is selling short risky?
In the future you will be asked to deliver to the buyer. You will have to deliver the share/ produce however much it costs to procure it.
What are the risks being long?
If you’re long you have bought sugar for a sprecific delivery date int he future. You HAVE to charter a vessel to deliver it once the delivery date arrives.
What happens if you fail to charter a vessel for commodities you ordered?
You will be in default - pay penalties
A cargo for immediate delivery that has not been sold is called….
a distressed cargo
Why is it bad to have distressed cargo?
Potential buyers know the owner of the distressed cargo is squeezed and they will be able to get a good price
What are the two requirements of FOB?
The deliverer is obligated to deliver the sugar free on board. The receiver (buyer) is obligated to present a vessel for loading. If either fail to meet requirements they are in default,
When are you a bear/ bearish on the market?
if you believe the price of something will fall
When are you a bull/ bullish on the market?
If you believe prices will rise.
What does a trader do on the market?
transforms a commodity in space/ time/ or form
