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Hedging Spot Corn: An Examination Of The Minneapolis Grain Exchange'S Cash Settled Corn Contract

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Author Info
Sanders, Dwight R.
Greer, Tracy D.
Abstract

This research examines the potential basis behavior and hedging effectiveness for the Minneapolis Grain Exchange's (MGE) cash settled corn contract. MGE futures cash settle to the National Corn Index (NCI) calculated by Data Transmission Network (DTN). Focusing on seven regions in Illinois, the data suggest that NCI Futures offer potential advantages over the existing Chicago Board of Trade (CBOT) corn futures. In particular, nearby basis variability could be reduced by nearly one-half from 8.8 cents per bushel to 4.5 cents per bushel, and hedging effectiveness may increase from an average of 80% for the CBOT to 93% for the NCI.

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File URL: http://purl.umn.edu/19064
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Publisher Info
Paper provided by NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2002 Conference, April 22-23, 2002, St. Louis, Missouri with number 19064.

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Date of creation: 2002
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Handle: RePEc:ags:ncrtwo:19064

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Web page: http://www.agebb.missouri.edu/ncrext/ncr134/

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Related research
Keywords: Crop Production/Industries; Marketing;

References listed on IDEAS
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  1. Mark W. Ditsch & Raymond M. Leuthold, 1996. "Evaluating the Hedging Potential of the Lean Hog Futures Contract," Finance 9609003, EconWPA. [Downloadable!]
  2. Ditsch, Mark W. & Leuthold, Raymond M., 1996. "Evaluating The Hedging Potential Of The Lean Hog Futures Contract," ACE OFOR Reports 14769, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics. [Downloadable!]
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This page was last updated on 2009-12-11.

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