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Comment by zer00eyz | Hacker News Reader

> You need to be a welder, plumber, vet, horticulturist, builder, metrologist

I love this about farmers. They are the polymaths of our age and folks dont get it. Farming YouTube is a trip because there's more tech in a tractor than in some startups.

> and if you're doing properly, crooked accountant as well.

Yea, most people dont get what a "future" is, and why corn and lumber have them (but not onions... thats a lesson too)... The farm has the support of a lot of high finance and hedging exists not just as an instrument but has a purpose.

Ask a farmer about a grain/pork "Marketing Plan" and who they are hiring as advisors and where that person got their degree...

It's a complicated world and there are some interesting intersections out there.

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> (but not onions... thats a lesson too)

That was too enticing to not look up. Wow, the story behind that is something: https://en.wikipedia.org/wiki/Onion_Futures_Act

Edit: There's a Planet Money with more on this story (which I've not listened to): https://www.npr.org/sections/money/2015/10/14/448718171/epis...

I put on history guy (YouTube) when im doing busy work. Thats where I picked up the fun fact: https://www.youtube.com/watch?v=WuiREF2e-Ps

The fascinating bit to me was that they axed the whole onion futures market vs just adding guardrails against predatory trading.

Then again... this was the 1950s and paper contracts, so US market intervention or not was more stark.

And also Eisenhower was likely more concerned about whether the USSR was going to nuke the US and if China was going to try to invade Taiwan for a third time.

Why would you only protect onions from market manipulation?

> Yea, most people dont get what a "future" is, and why corn and lumber have them (but not onions... thats a lesson too)... The farm has the support of a lot of high finance and hedging exists not just as an instrument but has a purpose.

Not many farmers I know (in an ag community) understand what a future is either, or would even know how to trade them. That's the domain of hedge funds, not farmers. (And, if they tried, they'd probably lose. It's not much different from me trying out day trading.)

The fruit of a farmer's work is not futures trading. It's trying to keep things alive long enough to make a small profit.

They should, it's basic insurance. You don't have to be a speculator, just understand that you're long the thing you're producing in the future so it makes sense to be short some future contracts to lock in your price in that future.

(Just make sure your futures broker accepts delivery, otherwise there's funny stuff happening)

> They should, it's basic insurance.

If you grow corn: It can be sold as a future, and you can have crop insurance on it.

IM not sure you grasp what a future is in the case of a farmer...

Now if your in construction, or buying fuel a future can be insurance. Or a risky bet.

None of that is like your heath or home owners or car insurance.... unless you dont have them.

The Great Onion Corner And The Futures Market - https://www.npr.org/2015/10/22/450769853/the-great-onion-cor...

How an Iowa farmer pushes through less-than-average crop yields - https://www.marketplace.org/2023/07/27/how-an-iowa-farmer-pu...

> Ryssdal: Yes. What about prices? When you take it to market — or when you’re going to take it to market — are you selling futures?

> Hemmes: Well, a lot of people do that. I forward cash grain, or forward contract. Right now, I could sell delivery in March and set my cash price, or set the basis. A lot of people do options to set that bottom. But I’m telling you, Kai, I need some kind of collar because of the whiplash I’ve been getting from these markets — they’re up one day 50, down 40 the next, and everything adds to it.

Farming is “not easy and it’s a lot of risk,” says Iowa soybean producer - https://www.marketplace.org/2024/05/28/farming-is-not-easy-a...

> Ryssdal: Have you sold your futures yet? Have you sold any of this stuff that just got in the ground?

> Hemmes: I have. I’ve sold about 30%. Our co-op gave me a heck of a bid. But it’s kinda like wait and see because this market just keeps going. Like soybeans are down 18 cents today and then they could go up 50 tomorrow. Who knows?

Do you grasp what a future is?

Having home/car/health insurance protects you against it being destroyed. Buying fuel futures protects you against the price of gas spiking. Having crop insurance protects you against your crops being destroyed. Selling crop futures protect you against the price of your crops falling.

It's all protecting you from events that would seriously hurt your finances, aka hedging/insurance.

> Selling crop futures protect you against the price of your crops falling.

Price contracts are a thing. You can do this in new england with fuel oil for heating. It is fairly common.

But futures pay today for a product at some later date. It's a loan as well.

And as a producer it's not just a hedge on price. What happens if your expect to yield 140 bushels of corn an acre, and only get 130? Your crop came in, so no insurance, how do you make up the missing bushels? You're buying those futures back or delivering the contract even at 10x the price.

That isn't an outcome one expects from a hedge or insurance.

There is a reason that there are specialists in marketing and delivery of products with futures markets that help them plan.

> Price contracts are a thing. You can do this in new england with fuel oil for heating. It is fairly common.

> But futures pay today for a product at some later date. It's a loan as well.

This does not compute. You say forward contracts are common but futures give you money today? Futures are standardised forward contracts, you don't get any money when you open them unless your futures are different than mine?

> And as a producer it's not just a hedge on price. What happens if your expect to yield 140 bushels of corn an acre, and only get 130? Your crop came in, so no insurance, how do you make up the missing bushels? You're buying those futures back or delivering the contract even at 10x the price.

Exactly right hence why I said 'some'? You hedge when you can to lock in e.g. aforementioned 30%.

> There is a reason that there are specialists in marketing and delivery of products with futures markets that help them plan.

Completely agree - but it isn't that complicated with futures. Now options...

https://rjofutures.rjobrien.com/futures-trading-resources/gl...

Futures are technically different than forward contracts... the former is public the latter is private.

But a lot of the people doing cash forwards, trade futures on the same products, and call and put options on those futures.

Then add actual insurance in on top of all that...

There are farms that look more like Wall Street Banks with how cover and leverage.

Thank you for the detailed explanation, that makes sense. I don't doubt that you want someone with financial expertise to handle futures trades. Since your example shows you're trading one risk for another.

I guess a better way to put it is: In the right package, selling futures can be a part of an effective insurance strategy for farmers.

Yeah I mean if hail destroys your corn it's a different kind of insurance you should buy, I agree I guess? I mean there's always a risk of getting LME-nickeled if I may, but just hoping that corn has a reasonable price next year is also a risky bet?

From a farmer's point of view, futures can allow for relatively cheap insurance against the agricultural product's price moving against you. You're basically negotiating the price of the product before it's ready to sell, with a standardized product on a global marketplace.

Again... Not just price

Payment date can be decoupled from delivery date... So it can be a "loan" as well.

As a producer you're betting on yield. If you expected 140 bushels an acre and got 130 your on the hook for the rest. Regardless of price on thee market ... even if its 10x what you were paid. SO your negotiating VOLUME on a product you haven't made yet, and could have a shortfall of.

There is a whole set of quality issues with the product as well... Too wet, to dry, wrong type, misses the mark on grading...

You can sell options on futures... some smaller amount of money today and agree to sell at a price at a later date, maybe... if the actual price is lower than your offer price then you get the money and the crop.

There is more to the futures market than HN learned from the Duke Brothers.

Futures may be famous as hedge fund vehicles today, but they were invented by farmers, for farmers.

https://en.wikipedia.org/wiki/Futures_contract#Origin

> Not many farmers I know (in an ag community) understand what a future is either

I can see that, but they do know about how pricing might be fixed. Obviously subsidies make a huge difference, so some crops might have a fixed price (ie things that are used to grow biofuels) vs stuff that has a free market vs single large buyer.

> You need to be a welder, plumber, vet, horticulturist, builder, metrologist

Not sure how commmon this is anymore. The age of the family farm with a mix of livestock, rotating crops, and woodlands are long gone in the developed world. Each of these tasks would be handled mostly by a professional in any serious farming operation.

Common.

Plenty of farmers (who are super savvy) have embraced social media, and are showing not telling what they do.

that might be gone but in my experience - and I live on a farm in the developed world - while some tasks are handled by professionals on serious operations, its pretty common for farmers to do a bit of their own welding, a bit of their own plumbing, treat their own animals, etc, and only bring in professionals for big jobs. Its still very much a family affair even if a farm is only focused on one crop.

I don't know how common this is in row crops, but it's exceptionally common in cattle ranching. The majority of cattle producers ("cow-calf" operations, the ones who raise cattle from birth to about half-grown) are smaller operations. They're absolutely jacks-of-all-trades.

Look up “Just a few acres farm” on YouTube. Pete, a retired architect, has done all of the above and documented it on his YouTube channel. Heck, add aerial drone videographer and video editor to the list. He makes some excellent videos while cutting hay!

He also has a lot of really practical videos on the business of small farming. He’s very adamant about not going into debt before you start, doing market research in your area, and starting very small but rolling over the proceeds from your first sales back into the farm.

Depends on what you farm. But if you have pasture, then you are all of those things. You need to make sure that the land is growing something edible at the right time, it needs to be drained.

All of that requires big machinery, and that breaks or is expensive. So it needs fixing. specialist fixers are there for expensive things, like combine harvesters. but for unfucking a plough or much spreader, thats a you problem.

A lot of farms where I live, in a developed country, are exactly this kind of mix.

Some cattle for dairy, meat and market. Some crops. And often some woodland for tax or grant reasons or under forestry contracts. Maybe some chickens or pigs or similar - usually for local markets.

It’s actually quite neat: I can easily obtain actually free range eggs at relatively low cost, produced within a few kilometers of where I live (a city). Same for pork products, etc.

Economics and polymath abilities aside. There is significant risk of bodily harm in farming. Humans, machinery, and chemicals create a potential deadly mix. The risk often captures children and amateurs as they have lesser developed farming knowledge and skills[1].

[1] https://www.nifa.usda.gov/about-nifa/blogs/study-reveals-agr...

Onion futures are banned apparently because ppl F-ed with them: https://en.m.wikipedia.org/wiki/Onion_Futures_Act

>I love this about farmers. They are the polymaths of our age and folks dont get it.

Letting it get too complicated risks losing all of the small-scale farms because then only large companies will have the scale and aggregate skill and money to farm. Tight margins means they might decide to quit and go do something else given the amount of skill and work required for so little profit.

Being a farmer and not owning the land that you work is soul crushing.

Does the Farming Simulator series of games aim to replicate this complicated variety of skills?

Farming Simulator, whilst good for listening to podcasts, seems about as accurate a simulator of farming as Goat Simulator is for being a goat.

Press A to stick weld your plow in the middle of the field.

Can you recommend some good farming youtubes?

Mike Mitchell is great. He's very Canadian but pleasant. And they have an operation on a massive scale (family business).

Barn Talk is... something. IF you're liberal it might offend you at some points, but there is a ton of gold in there. They also have a channel about their day to day farming.

Welker Farms, Millennial Farmer, Cole the Corn Star and Larson farms are all "interesting"... They are all very different.

Clarkson's farm has a number of issues, but it does give a fairly broad base about modern farming in the UK

especially as all that work in the first year meant he made something like £900

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