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John_Walter
Advisor

New global hedging tool

Announcement this morning that the World Bank is funding a new $4 billion global food price hedging tool. The plan will enable farmers and consumers in the developing world "to access up to $4 billion in protection against sharp swings in food prices, under plans announced by the World Bank Tuesday," Dow Jones reported this morning.

 

"The first-of-its-kind facility will be run by the group's private arm, the International Finance Corporation, in partnership with J.P. Morgan to allow producers, cooperatives and even banks to hedge their risk exposure in agricultural markets," DJ said.

 

Full story: click here.

 

Wonder if the development could impact marketing domestically?

 

--John

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6 Replies
Jim Meade / Iowa City
Senior Advisor

Re: New global hedging tool

I'm such a skeptic that my first reaction is "say what"?

It will be very interesting to see the details on this matter, and to see if it is available to those of us on this discussion group, and to see how the established U.S. hedge community greets it.

 

Mike - give us the scoop from the pit. 

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rayjenkins
Veteran Advisor

Re: New global hedging tool

Sounds like a scheme to finance margin calls---but I will wait to be convinced otherwise!
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ray h.
Senior Contributor

Re: New global hedging tool

    Sounds like a band-aid,(pre socialism)

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hardnox604008
Advisor

Re: New global hedging tool

I've assumed that we'd see more over the counter types of hedging tools evolve.

 

An excellent example is the Wells Fargo OTC system for their clients. I don't know for sure how the internals of that system work but assume that with clients on both the buy and sell side of markets like corn they can lay a lot of the risk off internally with just some adjustment in futures to net out risk.

 

But they are in a unique position as the lender- yep- you'd better pay your bank back at the end. 

 

I wonder what sort of leverage this arrangement would have with hedging clients?

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nwobcw
Advisor

Re: New global hedging tool

   One has to be skeptical.  Ag is the best money maker in the country right now.  We are only 2% of the population in America.  So, politically we are a nobody.  The World Bank teaming up with Wall Street is a huge pause for concern.  My thought is it's a way for them to have control over ag prices.   How?  I don't know.  But where there's a will there's a way.

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kraft-t
Senior Advisor

Re: New global hedging tool

Evidently private banks aren't providing that service. Do you suppose JP Morgan is providing that service with international government (USA) guarantees?

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