Farmers' Reaction to Agricultural Futures Runs from Enthusiasm to Ignorance and Ire

By Morris, John | American Banker, October 23, 1984 | Go to article overview
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Farmers' Reaction to Agricultural Futures Runs from Enthusiasm to Ignorance and Ire

Morris, John, American Banker

Jailed twice for sticking to his views, farmer Wayne Cryts is more opinionated than most.

And he does not like agricultural futures.

Neither does the American Agriculture Movement (AAM), a farmers' trade association that calls itself "the most politically motivated" of all farm groups, and which others regard as radical.

A few years ago, Mr. Cryts raided a grain elevator to retrieve his soybean harvest caught up in bankruptcy litigations. And just a couple of weeks ago, he left his Missouri farm to demonstrate with other AAM activists outside the Chicago Board of Trade. Their beef: Speculators in futures are depressing farm prices, threatening the very existence of the American family farmer.

These abuses should be stamped out, they believe. They are asking Congress to investigate, petitioning the Commodity Futures Trading Commission to act. Meanwhile, resentment against those Chicago traders rises higher in the farm community. In some parts of it, at least.

This is just one end of the spectrum. At the other, two small rural banks are pioneering the entry of their industry into agricultural futures. One has placed hedges for 40 of its farm customers, and the other made its first trade in early August -- too late to help farmers hedges this year's crop.

In between these far-sighted banks and the radical AAM farm group lies a vast market for agricultural futures. But it can only be tapped if banks launch a massive educational effort. Often, it is taken for granted that because agricultural futures have been around for over 100 years, every farmer knows all about them. Nothing could be further from the truth. In the farm community, one can find farmers who are delighted with the results of hedging with futures, while others swear the markets will ruin them.

In a group, and in an abstract sense, farmers always have a degree of mistrust. "We've found we can educate them better on a one-on-one basis, when we can relate futures to their individual circumstances," said David Harrison, senior vice president of the $565 million-deposit First of America Bank-Michigan NA of Kalamazoo. His bank is the second to become, in essence, an agent of a futures broker under the grand title of introducing broker.

The first was the $27 million-deposit Watseka First National Bank in Illinois. There, vice president and farm president Kerry Bell pointed out that "Farmers don't generally know how the hedging function works. There was no one out there helping them."

Yes, he agreed, that is surprising. Especially as commodity futures brokers have been trying to sell futures to farmers for years. But farmers, being suspicious souls, have kept away from the brokers. After all, they all know of a friend of a friend who was bankrupted after the broker get him speculating, and that isn't going to happen to them! Producers at Disadvange

David Seiter, national director of the AAM, grudgingly admits that in some cases farmers can hedge a crop and be better off. But only "a very small percentage of producers are educated in the ins and outs of hedging and trading practices." And producers are at a disadvantage trying to play the game against those wily professional traders in Chicago, he said.

Board of Trade chairman Thomas P. Cunningham told the protesting farmers that the exchange does not set prices; it acts more as a barometer, registering the price changes for the rest of the world. "We believe that this group is misinformed about the function of the Chicago Board of Trade," he added.

Wayne Cryts was not convinced. It takes a lot to change the mind of a man who three years ago led hundreds of farmers to raid a failed grain elevator to rescue his 31,000 bushels of soybeans held captive by bankruptcy proceedings. Twice he was jailed for refusing to name his accomplices, and only six months ago his fines of $290,000 were thrown out by a Federal judge.

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Farmers' Reaction to Agricultural Futures Runs from Enthusiasm to Ignorance and Ire


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