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Cross-Hedging Cottonseed Meal

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Author Info

  • Rahman, Shaikh Mahfuzur
  • Turner, Steven C.
  • Costa, Ecio de Farias

Abstract

This study examines the feasibility of cross-hedging cottonseed meal with soybean meal futures. The Bayesian tests for market efficiency on the cash and futures price data soundly rejects the presence of nonstationary root. The simple linear regression of cottonseed meal cash prices on soybean meal futures provides a direct price movement relationship. Using the estimated hedge-ratios, the net realized prices are calculated for seven different cash markets. The net realized prices exhibit risk efficiency superior to cash pricing. The empirical analyses suggest that soybean meal futures can be used as a potential cross-hedging vehicle for cottonseed meal.

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Bibliographic Info

Paper provided by University of Georgia, Department of Agricultural and Applied Economics in its series Faculty Series with number 16707.

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Date of creation: 2000
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Handle: RePEc:ags:ugeofs:16707

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Postal: Conner Hall, Athens, GA 30602
Phone: (706) 542-2481
Fax: (706) 542-0739
Web page: http://www.caes.uga.edu/departments/agecon/index.html
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Keywords: Marketing;

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References

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  1. Hayenga, Marvin L. & Jiang, Bingrong & Lence, Sergio H., 1996. "Improving Wholesale Beef and Pork Product Cross Hedging," Staff General Research Papers 5004, Iowa State University, Department of Economics.
  2. Anderson, Ronald W & Danthine, Jean-Pierre, 1981. "Cross Hedging," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1182-96, December.
  3. DeJong, David N., 1992. "Co-integration and trend-stationarity in macroeconomic time series : Evidence from the likelihood function," Journal of Econometrics, Elsevier, vol. 52(3), pages 347-370, June.
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Cited by:
  1. Dahlgran, Roger A., 2007. "Inventory and Transformation Hedging Effectiveness in Corn Crushing," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37557, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  2. Dahlgran, Roger A. & Ma, Xudong, 2008. "Hedge Effectiveness Forecasting," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37604, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  3. Franken, Jason R.V. & Parcell, Joseph L., 2002. "Cash Ethanol Cross-Hedging Opportunities," Working Papers 26035, University of Missouri Columbia, Department of Agricultural Economics.
  4. Dahlgran, Roger A., 2005. "Hedging Cash Flows from Commodity Processing," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19046, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  5. Dahlgran, Roger A., 2002. "Inventory And Transformation Risks In Soybean Processing," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19054, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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