The two papers presented at this session contain many points with which I can only agree, but also some thoughts with which one can take issue. In line with this, I would like first to share some thoughts that occurred to me while reading the two papers, and then add some observations made from my specific vantage point as financially-oriented researcher and investment analyst in a major agribusiness firm. The Barry/Fraser paper focuses on increased price variability for the farmers' products as an indicator that financial risk in primary agricultural production has increased. Furthermore, the paper discusses risk management primarily in terms of minimizing price variability and stabilizing expected returns. I contend that price variability, in itself and without reference to the corresponding cost of production, does not prove that the probability of incurring a financial loss has increased. It merely establishes the fact that it will statistically be more difficult to obtain the highest price possible. As a case in point, aggregate net farm income during the years 1973 and 1974 has reached unprecedented heights, both in absolute dollars and in relation to assets employed. This was not the result of a very sudden increased sophistication on the part of farmers to deal with the greater product price variability. The coefficients of variation for the annual mean prices shown in table 1 of the Barry/ Fraser paper are meaningless in my opinion because they are influenced heavily by the length of period selected for analysis and by the underlying secular trend in price levels. The paper points to a growth of over 1200% in debt per farm between 1950 and 1975 and a payback period of nearly three years for this debt as indicators of decreasing ability of the farm sector to absorb financial risks. But comparing statistics from the U.S. Department of Agriculture's Balance Sheet of the Farming Sector 1974 with comparable data for the Grain Processing Industry (SIC 2041) and the Agricultural Merchandising Sector, it beomes evident that these other sectors operate on a smaller gross profit margin and a much thinner cushion of financial reserves. This is what made it mandatory for them to devote major efforts to the task of risk management. Considering relative strength of net worth, it would take only a small fraction of the unhedged decline in the price of commodities to completely wipe out the net worth of a merchandising firm, compared to the decline necessary to completely dissipate the net worth of the farmer (see table 1). Barry/Fraser also suggest that more frequent sequential marketing can reduce risk, which is correct if we assume that risk aversion is the ultimate goal. But sequential marketing does not optimize prices. It is an averaging procedure that only guarantees that something better than the lowest price will be obtained. Maybe this explains why pooling results achieved by the cooperatives, as well as by the Canadian and Australian Wheat Boards, have been mediocre at best. Professor Gray's paper emphasizes institutional factors and the role of organized futures markets. I agree with his comments both in regard to the value of these institutions to our society and to the limitations still remaining. But in regard, for instance, to the lack of a sorghum futures contract, a broader definition by the Commodity Futures Trading Commission of bona fide hedging could do much to alleviate the present problem. Cross-hedging sorghum in corn futures gives essentially as much price protection as can be obtained hedging corn in corn futures. Another problem mentioned is the need for added margin calls to hedgers during periods of adverse price movements. It would seem there should be an objective reappraisal of using commodity options to deal with this problem. (Obviously, I would be opposed to dealing in naked options.) The hedger would in effect have already purchased with the option all additional margin potentially due if the market changes required it. Konrad Biedermann is the director of planning at the Continental Grain Company, New York.