Crop and livestock producers have long identified price risk as one of the highest risk management priorities of the farm business. One of the major challenges of marketing is the extreme variability in prices, not only across years, but within years. A second challenge in making pricing decisions is that future prices cannot be anticipated with a high degree of accuracy. Producers have a long time period in which to price their production. Livestock futures contracts are available 18 months into the future while crop contracts are available four years into the future. The factors that determine prices cannot be accurately forecast that far into the future. Even limiting the pricing window to a few months before livestock reach market weight or a few months before crops are harvested through the storage period, price-determining factors can and often do change dramatically, making the decision about when and how much to price extremely difficult.
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