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Analysis of Expected Price Dynamics Between Fluid Milk Futures Contracts and Cash Prices for Fluid Milk

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  • Fortenbery, T. Randall
  • Cropp, Robert A.
  • Zapata, Hector O.
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    Abstract

    Future contracts for fluid milk began trading in late 1995 and early 1996. This paper investigates the potential use of fluid milk futures contracts as hedge vehicles for dairy producers in the Upper Midwest and California markets. This is done by developing simulated futures prices for the period 1988 to 1995. The simulated futures prices are used to estimate basis relationships between cash and futures prices for the markets considered. Results suggest that the fluid milk futures contracts could be used to reduce market price risk for producers in the Upper Midwest. Results were less conclusive for California producers.

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    File URL: http://purl.umn.edu/90427
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    Bibliographic Info

    Article provided by Agricultural Economics Association of Georgia in its journal Journal of Agribusiness.

    Volume (Year): 15 (1997)
    Issue (Month): 2 ()
    Pages:

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    Handle: RePEc:ags:jloagb:90427

    Contact details of provider:
    Postal: 301 Conner Hall, University of Georgia, Athens, GA 30602-7509
    Web page: http://www.agecon.uga.edu/~jab/
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    Related research

    Keywords: Fluid milk futures; Contracts; Basis; Dairy markets; Agribusiness; Demand and Price Analysis;

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    Cited by:
    1. Bozic, Marin & Newton, John & Thraen, Cameron S. & Gould, Brian W., 2012. "Mean-reversion in Income over Feed Cost Margins:Evidence and Implications for Managing Margin Risk by U.S. Dairy Producers," Staff Papers 132379, University of Minnesota, Department of Applied Economics.

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