4 BULLETIN 362^ U. S. DEPAETMENT OF AGBICITLTTJRE. 



HEDGING. 



As a protection or insurance against loss from price fluctuations 

 between the time of purchase and the time the grain is sold, an eleva- 

 tor may hedge its holdings. When grain is taken into the eleva- 

 tor it can be immediately protected by its sale for future dehvery. 

 When the grain is sold the hedge is taken up ; that is, a purchase for 

 future dehvery is made. If the price of cash wheat has fallen in the 

 meantime, the loss is counterbalanced by the profit on the hedge, as 

 the future price will have decreased with the cash price. In this 

 manner an elevator protects itself against loss by the drop in the 

 price and waives the profit, which might be made in case the price 

 increased. Doing business in this way ehminates all chance of large 

 losses or gains in the fluctuations in prices which take place from the 

 time the farmer is paid for his dehveries until sales are made. 



Deahng in futures should be allowed only where actual grain is 

 hedged. Commission firms generally will accept orders for purchases 

 or sales of futures in small quantities, say lots of 1,000 or 2,000 bushels. 

 The commission firm then assembles its various orders and secures 

 trades in larger lots. 



INSURANCE OF ELEVATORS. 



The practice of insuring against fire is a well-established principle 

 in respect to all property, but carelessness in keeping insurance which 

 is sufficient to cover total loss has proven disastrous in many instances. 

 Owing to the marked fluctuation in the amount of grain on hand 

 during the shipping season, grain elevators particularly are hkely 

 to be underinsured. For convenience, it is advisable to insure build- 

 ings and contents under separate poUcies. The pohcy covering 

 buildings seldom varies in amount during the year, but that covering 

 grain may be subject to change. Some managers in small towns 

 where no insurance agent is stationed have protected their grain 

 stock by insuring for maximum capacity. Others make arrange- 

 ments with the agent allowing for changes on notice, and thus effect 

 a saving in premiums paid. 



DESCRIPTION OF THE OFFICE OF MARKETS AND RURAL ORGANIZATION 

 GRAIN ELEVATOR ACCOUNTING SYSTEM. 



As this bulletin is intended to be sufficiently complete to enable an 

 elevator company to install the system as devised by the Office of 

 Markets and Rural Organization, a detailed description of the forms 

 comprising it is essential. 



The complete system includes 15 forms, as follows: 



Form No. 1 — Cash, journal, purchase and sales record. 

 Form No. 2 — Record of grain receipts. 

 Form No. 3 — Record of grain purchases. 



