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Potential demand for hedging by Australian wheat producers

  • Simmons, Phil
  • Rambaldi, Alicia N.

The potential for hedging Australian wheat with the new Sydney Futures Exchange wheat contract is examined using a theoretical hedging model parametised from previous studies. The optimal hedging ratio for an `average' wheat farmer was found to be zero under reasonable assumptions about transaction costs and based on previously published measures of risk aversion. The estimated optimal hedging ratios were found by simulation to be quite sensitive to assumptions about the degree of risk aversion. If farmers are significantly more risk averse than is currently believed, then there is likely to be an active interest in the new futures market.

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File URL: http://purl.umn.edu/118012
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Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

Volume (Year): 41 (1997)
Issue (Month): 2 (June)
Pages:

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Handle: RePEc:ags:aareaj:118012
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  1. Peter Bardsley & M. Harris, 1987. "An Approach To The Econometric Estimation Of Attitudes To Risk In Agriculture," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 31(2), pages 112-126, 08.
  2. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
  3. Vincent, David P & Dixon, Peter B & Powell, Alan A, 1980. "The Estimation of Supply Response in Australian Agrucilture: The CRESH/CRETH Production System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 221-42, February.
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