Advanced Search
MyIDEAS: Login to save this article or follow this journal

Optimal Hedging Levels and Hedging Effectiveness in Cattle Feeding


Author Info

  • Heifner, Richard G.
Registered author(s):


    Optimal hedging level, minimum-risk hedging level, and hedging effectiveness are defined in a manner consistent with portfolio theory and used to analyze hedging potential in cattle feeding. Estimated upper limits on optimal hedging levels ranged from 0.56 to 0.88 unit of short futures per unit of four types of slaughter cattle produced at five locations. When futures trading costs are taken into account, optimal hedging levels are depressed below these limits, depending upon the resource availabilities and profit expectations of individual firms. Location, grade, and sex of the cattle fed have small effects on optimal hedging levels and hedging effectiveness.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Download Restriction: no

    Bibliographic Info

    Article provided by United States Department of Agriculture, Economic Research Service in its journal Agricultural Economics Research.

    Volume (Year): (1972)
    Issue (Month): 2 ()

    as in new window
    Handle: RePEc:ags:ueraer:147014

    Contact details of provider:
    Postal: 1400 Independence Ave.,SW, Mail Stop 1800, Washington, DC 20250-1800
    Phone: 202-694-5050
    Fax: 202-694-5700
    Web page:
    More information through EDIRC

    Related research

    Keywords: Futures trading; hedging; cattle feeding; risk; price analysis; Agricultural and Food Policy; Livestock Production/Industries; Production Economics;


    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Gum, Russell L. & Wildermuth, John, 1970. "Hedging on the Live Cattle Futures Contract," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 4.
    2. Paul, Allen B. & Wesson, William T., 1967. "Pricing Feedlot Services Through Cattle Futures," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 2.
    3. Ronald I. McKinnon, 1967. "Futures Markets, Buffer Stocks, and Income Stability for Primary Producers," Journal of Political Economy, University of Chicago Press, vol. 75, pages 844.
    4. Howell, L. D., 1962. "Analysis of Hedging and Other Operations in Wool and Wool Top Futures," Technical Bulletins 170885, United States Department of Agriculture, Economic Research Service.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Rahman, Shaikh Mahfuzur & Turner, Steven C. & Costa, Ecio de Farias, 2000. "Cross-Hedging Cottonseed Meal," 2000 Annual meeting, July 30-August 2, Tampa, FL 21769, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Rahman, Shaikh Mahfuzur & Dorfman, Jeffrey H. & Turner, Steven C., 2004. "A Bayesian Approach to Optimal Cross-Hedging of Cottonseed Products Using Soybean Complex Futures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(02), August.
    3. Dubman, Robert W., 1988. "Establishing Peanut Purchasing Contract Terms With Uncertain Market Prices And Input Supplies," Journal of Food Distribution Research, Food Distribution Research Society, vol. 19(1), February.
    4. Arshanapalli, Bala G. & Gupta, Omprakash K., 1996. "Optimal hedging under output price uncertainty," European Journal of Operational Research, Elsevier, vol. 95(3), pages 522-536, December.
    5. Gordon, Douglas, 1984. "Performance of Thin Futures Markets: Rice and Sunflower Seed Futures," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 4.
    6. Costa, Ecio de Farias & Turner, Steven C., 2001. "Price Risk Management For Peanut Meal," Faculty Series 16656, University of Georgia, Department of Agricultural and Applied Economics.
    7. Su, EnDer, 2013. "Stock index hedge using trend and volatility regime switch model considering hedging cost," MPRA Paper 49190, University Library of Munich, Germany.
    8. Simmons, Phil, 1999. "Does Separation Theorem Explain Why Farmers Have So Little Interest In Futures Markets?," Working Papers 12933, University of New England, School of Economics.
    9. Ward, Ronald W. & Schimkat, Gregory E., 1979. "Risk Ratios And Hedging: Florida Feeder Cattle," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 11(01), July.
    10. Chiu, Wan-Yi, 2013. "A simple test of optimal hedging policy," Statistics & Probability Letters, Elsevier, vol. 83(4), pages 1062-1070.


    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:ags:ueraer:147014. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.