Tomato Futures, Part Deux

In my fictional parallel universe...

...the phone rings.

"Hey, what's up, man?"

"Thanks for returning my call," I reply. "Off-season OK for you?"

"Yeah, whatever. I been decompressing for a month now, and I still ain't back to normal."

"Salamanders still in your brain, huh?"

"You got that right. We were defending something that didn't need to be defended in the first place," he says.

"No lie. But listen. Forget the FDA, the CDC, all of them. I got an idea."

"Oh, @#$&."

"Wait a minute. This is good. You ready?"

"Yeah, whatever."

"OK." (I breathe, a pregnant pause for effect.) "I wanna buy futures on your fall crop."

"You wanna buy what?!"

"Futures. In November. Five loads, two weeks before Thanksgiving. Let's talk price."

He pauses, I can hear the virtual gears straining to turn in his head over the crackling phone line.

"So you want to do a contract--a set price, Act of God clause, the whole nine yards."

"No, no, you don't understand. It's futures. I buy 'em, you sell 'em. Any time between now & November, which is expiration, I have the option to sell 'em back to you, at whatever the market will bear. And buddy boy, I plan to make a profit. I think you skated by on hurricane season last year. This year you won't be so lucky."

"I think you're completely out of your mind. You been getting into the Patron again?"

"Nope, sober as a judge. But this is the coming thing. When all the young MBA-types come into the business, they're gonna be doing this. Why shouldn't we have a leg up on 'em?"

"Lemme tell you something, " he says. "When those 'MBA-types', as you say, come into the business, it'll be time for me to get out, and run away very fast. The contract deal is bad enough--they're made to be broken. This cockamamie thing...would have people shooting each other."

"OK, OK. I just thought you were more forward-thinking than I guess you are."

"I'll remember that come fall."

"Hey, just kidding. Just wanted to activate your mind a little. And see if you're gonna make it up here for a night or two before you have to go back down south."

"Maybe. Call you next week. Seeya."

Later,

Jay

The Future Is...not Plastics...but Futures

When the tomato market goes through tough times, like the present depressed situation with homegrowns & backyard product a-plenty, I sometimes wonder which specific factor will be the one to finally pull the price out of the doldrums.

Short-term, will it be less supply out of the commercial growing areas like California & Tennessee? Not likely---they've already scaled back because prices are at or below picking & packing costs.

More demand? Nope, I would venture to say that more tomatoes are being consumed right now on a daily basis than at any time since before the 'salamander' scare, which was what a shipping-point salesman coined it after the word 'salmonella' became tiresome to all of us. I think I'll scream next time I see a neighbor hold up a scarred, misshapen cull of a tomato from his garden, one he'd sneer at in the store, and proclaim 'this is the best tomato I've had in a year!'

Serenity now, indeed...

So we try to talk our way out of this malaise, but what if we had an alternative to offset this molasses-like movement?

Like...futures in tomatoes, or any fresh commodity.

They do it in orange juice, they do it in cotton, they do it in eggs, for God's sakes. If they can project what comes out of a chicken's rear-end, I have to think they can do it for fresh produce.

But, beware the old saying, be careful what you wish for, it might be worse than what you already have. I'm braced for that.

So...let's see where this leads us over the next couple blogs or so. I have a rudimentary knowledge of futures & option markets in stocks. I am aware of time decay nearing the end of a contract, towards the expiration date. Sadly, I have no idea how time decay works when the actual product is physically decaying at the same time. Sounds like a bad scene to me, man.

Or an impending train wreck.

Later,

Jay

No future for onions

Traders playing the oil futures market are among the culprits blamed for sending the price of a barrel of oil north of $140 in recent weeks.

While this five-fold price rise in five years has spread pain across the global economy, to onion buyers such wild swings are just part of doing business, according to CNN/Money:

Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.

Federal law has barred an onion futures market since the late 1950s, the only agricultural commodity for which the U.S. government prohibits a futures market.

Bob Debruyn of Debruyn Produce, a Michigan-based grower and wholesaler, is the son of one of the original onion growers who lobbied Congress for the trading ban and now thinks the market would operate more smoothly with an onion futures contract.

"I would think that a futures market for onions would make some sense today, even though my father was very much involved in getting rid of it," he said.