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Comparison of Hedging Cost with Other Variable Input Costs

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  • Riley, John Michael
  • Anderson, John D.

Abstract

Recent spikes in commodity prices have led to higher margin amounts and option premiums. For the most part, producers have always attributed their lack of use in reducing risk via futures and options markets to the high cost associated with the use of these markets. This study determines the relative costs of hedging with futures and options and compares these with the costs of other variable inputs. We find that with the exception of hedging corn with both tools and soybeans with options the costs of hedging has increased at roughly the same rate as all other inputs.

Suggested Citation

  • Riley, John Michael & Anderson, John D., 2010. "Comparison of Hedging Cost with Other Variable Input Costs," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2010, pages 1-9.
    • Handle: RePEc:ags:jasfmr:96378
    DOI: 10.22004/ag.econ.96378
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    File URL: https://ageconsearch.umn.edu/record/96378/files/326_Anderson.pdf
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    Cited by:

    1. Shi, Ruoding & Isengildina Massa, Olga, "undated". "Double-Edged Sword: Liquidity Implications of Futures Hedging," 2018 Annual Meeting, August 5-7, Washington, D.C. 274106, Agricultural and Applied Economics Association.
    2. Shi, Ruoding & Isengildina Massa, Olga, 2022. "Costs of Futures Hedging in Corn and Soybean Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 47(2), May.

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