1. The Brokerage Account CME Commodity Marketing Manual Chapter 3

2. Choosing a Broker Full-service Brokers  Provide Marketing Information and Advice  May call you with advice Discount Brokers  Call in an order and they place it  Commissions may be less

3. Choosing a Broker Talk to other producers, get referrals Look for farm oriented brokers  Be sure they have experience in your commodity Visit with the broker  Be sure they understand your goals Hedge vs. Speculator Looking to transfer risk when prices are profitable  Be sure you are compatible Check with National Futures Association  http://www.nfa.futures.org http://www.nfa.futures.org

4. Opening an Account An account will be needed for margins Check with your lender Draft a broker-lender-producer agreement  Lender agrees to provide funds for hedging only  Hedging profits are applied against your loan balance  The lender can liquidate your account without your consent? Be sure your lender understands hedging

5. Broker Forms Personal Information  Background on you and for tax purposes  Information is held confidential Risk Disclosure Statement  Required by CFTC Brokerage Firm’s Agreement Hedge Account Designation  Limit trading to your commodities

6. Placing an Order Market Order Price Order Stop Order Stop Close Only

7. Hedging Account Page 33

10. Broker’s Statement Each trade made Futures gains or losses to date Market value of options you hold Cash deposits and withdrawals Account balance, profit and loss

11. Your Own Records Important to keep your own trading journal  Keeps track of your marketing plan  For tax purposes Will need to prove to the IRS that you were hedging and not speculating

12. Homework Chapter Three Exercise  Page 35