During 2012, the U.S. experienced one of the worst droughts in more than half a century, withering crops and sending cattle feed prices to all-time record highs. According to the USDA, consumers can expect to pay up to 4% more for groceries in 2013 as a result. Clearly weather impacts both grain and beef markets, however it’s only one of the factors that affect the price of our food.
Effective markets are part of the solution to managing price volatility as a result of the factors behind beef prices. Farmers and ranchers use our futures markets to manage their price risk, and speculators play an important role in these markets. They take on that price risk in exchange for the opportunity to make a profit. In doing so, speculators are providing much-needed liquidity to hedgers and enabling effective price discovery and more efficient transfer of price risk.
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