Ledger Provision in Hog Marketing Contracts
AbstractPrice-dependent loan agreements at low interest rates have sometimes been included in North American hog sector long-term marketing contracts. We show that a general form of this stipulation can be viewed as a hybrid between a forward rate agreement and a bundle of commodity spot options. In some cases, the provision amounts to a commodity swap. These observations provide an approach to valuing the provision. Historical data are used to estimate expected payouts to the producer under the contract feature.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 10645.
Date of creation: 01 Jul 2003
Date of revision:
Publication status: Published in Agricultural Finance Review, Spring 2006, vol. 66 no. 1, pp. 77-89
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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Other versions of this item:
- David A. Hennessy & Donald Lien, 2003. "Ledger Provision in Hog Marketing Contracts," Center for Agricultural and Rural Development (CARD) Publications 03-wp336, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- NEP-AGR-2003-07-29 (Agricultural Economics)
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