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Price Risk Reduction in Marketing Corn from Using Hedging Strategies

Published online by Cambridge University Press:  10 May 2017

Michael A. Kane ,
James G. Beierlein  and
James W. Dunn
Michael A. Kane
Affiliation:
The Pennsylvania State University
James G. Beierlein
Affiliation:
The Pennsylvania State University
James W. Dunn
Affiliation:
The Pennsylvania State University
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Abstract

The use of hedging with commodity futures markets to reduce the price risk in corn production is examined. Both intra-year and inter-year risk are evaluated with different hedging strategies. Strategies involve no hedge, hedge and hold, controlled hedge placement and hold, and in and out hedging. Both technical and forecasting criteria are used to place hedges in the more active strategies. Substantial risk reduction is possible, often without a reduction in price received. Considerable basis risk diminishes the risk reducing properties of a hedge and hold strategy.

Type
Articles
Information
Journal of the Northeastern Agricultural Economics Council , Volume 12 , Issue 1 , Spring 1983 , pp. 49 - 52
Copyright
Copyright © Northeastern Agricultural and Resource Economics Association 

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