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Forecasting Livestock Feed Cost Risks Using Futures and Options

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Listed:
  • Chen, Gang
  • Roberts, Matthew C.
  • Roe, Brian E.

Abstract

The costs of corn- and soybean-based feeds compose a substantial proportion of the variable costs faced by both mainstream and emergent confined livestock producers. This research develops a method to provide a joint distribution of prices of corn and soybean meal at a future time. Black's 1976 option model and stochastic volatility jump diffusion (SVJD) model are compared in volatility forecasting performance. In general, SVJD is superior to Black's model, though their performance is both commodity-specific and forecasting horizon specific.

Suggested Citation

  • Chen, Gang & Roberts, Matthew C. & Roe, Brian E., 2005. "Forecasting Livestock Feed Cost Risks Using Futures and Options," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19048, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:ncrfiv:19048
    DOI: 10.22004/ag.econ.19048
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    References listed on IDEAS

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    Keywords

    Livestock Production/Industries; Marketing;

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