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Producer-Level Hedging Effectiveness of Class III Milk Futures

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Listed:
  • Sanders, Dwight R.
  • Schneider, Jonathan
  • Altman, Ira J.

Abstract

Mailbox milk prices from a representative dairy operation in Illinois are used to gauge the farm-level hedging effectiveness of Class III milk futures. The results indicate a hedge ratio of 0.85 can reduce price risk by over 90%. The importance of seasonal basis components is highlighted.

Suggested Citation

  • Sanders, Dwight R. & Schneider, Jonathan & Altman, Ira J., 2007. "Producer-Level Hedging Effectiveness of Class III Milk Futures," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34983, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saeasm:34983
    DOI: 10.22004/ag.econ.34983
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    References listed on IDEAS

    as
    1. Bamba, Ibrahim & Maynard, Leigh J., 2004. "Hedging-Effectiveness of Milk Futures Using Value-At-Risk Procedures," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19028, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. Fortenbery, T. Randall & Cropp, Robert A. & Zapata, Hector O., 1997. "Analysis of Expected Price Dynamics Between Fluid Milk Futures Contracts and Cash Prices for Fluid Milk," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 15(2), pages 1-20.
    3. Thraen, Cameron S., 2002. "A User'S Guide To Understanding Basis And Basis Behavior In Multiple Component Federal Order Milk Markets," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19063, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    4. Sanders, Dwight R. & Manfredo, Mark R. & Greer, Tracy D., 2003. "Hedging Spot Corn: An Examination Of The Minneapolis Grain Exchange'S Cash Settled Corn Contract," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 21(1), pages 1-17.
    Full references (including those not matched with items on IDEAS)

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