Price Risk Management Strategies For Grain Importers
AbstractThe presence of multiple sources of uncertainty complicates hedging decisions. One of these is the output price and its correlation with input prices. The other is how far forward a firm covers its positions. This study analyzes hedging strategies for grain importers as processors. The analytical model addresses questions of the hedge horizon and accounts for the correlation between input and output prices and exchange rate risk. A theoretical model was developed explicitly modeling the operations of a grain importing firm. The concept of strategic demand for hedging was developed in the context of an analytical model, representing the adjustment in hedge ratios in relation to the hedge horizon and input-output price correlations. Results indicated that the hedging demand diminishes as the time horizon increases, that input-output price correlations have an important impact on hedging, as does the exchange rate. The model also illustrated the impact of price controls and/or output contracting on risk exposure and the demand for hedging.
Download InfoIf 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.
Bibliographic InfoPaper provided by North Dakota State University, Department of Agribusiness and Applied Economics in its series Statistical Series Reports with number 23665.
Date of creation: 2002
Date of revision:
price risk uncertainty; hedging; grain; importers; International Relations/Trade; Risk and Uncertainty;
Other versions of this item:
- Wilson, William W. & Wagner, Robert, 2002. "Price Risk Management Strategies For Grain Importers," Staff Papers 23665, North Dakota State University, Department of Agribusiness and Applied Economics.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Nguyen, Nam C. & Wegener, Malcolm K. & Russell, Iean W. & Cameron, Donald & Coventry, David & Cooper, Ian M., 2005. "Risk Management Strategies by Australian Farmers," 15th Congress, Campinas SP, Brazil, August 14-19, 2005 24295, International Farm Management Association.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.