Issue link: https://read.dmtmag.com/i/232761
Northwest Agricultural Show 2014 sell to processors who make apple juice, and the processors would use the market to reduce price risk with companies that buy juice for sale in the retail market. Packers could offer forward contracts to growers, much as grain elevators now do for grain growers. Elevators offer the price for future delivery and then offset their risk in the futures market. "For a packer to offer a fixed price to the grower, he'd have to use futures," Barley said. Otherwise, the packer would face the risk that the product value would decline while the pay price did not. Several of Barley's instructional seminars, and other information explaining the concepts around trading in apple juice concentrate, appear on the MGEX Web site (www.mgex.com) on the apple juice concentrate page. Apple growers, even if they don't use the futures market, can find good information on that Web site about stocks of apple juice concentrate, historical and current cash prices for processing apples, and fact sheets about apple juice concentrate and they can sign up for e-mail notices about the concentrate market. "As the futures market catches on, it can change the way the entire industry operates." Why futures? The basic contract is for 1,800 gallons of 70˚ Brix apple juice concentrate. Concentrate has been —Kevin Barley trading around $8 a gallon, so the value of a contract is more than $14,000 and requires about 10 percent to be held as margin money. There are several important elements that make the apple juice concentrate business risky and therefore make futures contracts valuable. First, a key element for Americans is that most apple juice concentrate is not made in America; it is made in China, Poland, and Argentina. Americans who buy concentrate have less than perfect information about what these concentrate makers are doing and will do, which puts them at risk between the time they buy the product and when they sell it. There is uncertainty all along the chain from grower to retailer. Futures contracts can reduce that uncertainty. "As the futures market catches on, it can change the way the entire industry operates," Barley said. "But it's an educational process." A second element is the low value of cull apples. "Growers don't really care about the price of juice apples," Barley said. "It's like pennies to them compared to the price of fresh-market apples." Even under the best circumstances, the value of juice apples to the grower would be about half of the wholesale value of the juice, with the other half going to the processor. A ton of apples will make about 27 gallons of concentrate, Barley said, which at $8 a gallon is worth $216 to the processor. Juice apple prices typically range widely from about $65 to $150 a ton, less when there's a glut, more when they're scarce. Before working on apple juice concentrate, Barley spent years perfecting futures contract trading in orange juice. That's different, he said, because, unlike apples, most oranges he is dealing with are grown for their juice and are not a byproduct of the fresh market. • www.goodfruit.com Portland Expo Center Three Days Only! | January 28th – 30th, 2014 Free Parking! Family Day The Northwest's Largest January 29th One $20 Ticket Gets The WHOLE Family In On One Ticket Everything For Every Farmer Under One Roof Miles of Aisles and Acres of Displays! Three Huge Buildings Packed With The Latest Farm Equipment, Products, Services and Supplies! For Detailed Information Visit: nwagshow.com Find Us On Facebook nwagshow.com/facebook On-Site Meetings! Certifications, Business Development, New Technologies and Products! The N.W. Ag Show Is A Celebration Of N.W. Agriculture! Buy, Learn, Meet & Shop! Not satisfied with your current insurance situation? Manley Crop Insurance not the biggest agency in the Northwest... Outstanding personalized service Over 30 years experience References upon request Ask us about our Hail Insurance An Equal Opportunity Provider 2014 AGR INSURANCE Closing Deadline Is January 31st Call Ann Manley today 888-786-7730 GOOD FRUIT GROWER JANUARY 1, 2014 31