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Impacts of Changes in Market Fundamentals and Price Momentum on Hedging Live Cattle

Author

Listed:
  • Coffey, Brian K.
  • Tonsor, Glynn T.
  • Schroeder, Ted C.

Abstract

Basis prediction errors for live cattle in the five major Mandatory Livestock Price Reporting areas are analyzed to determine how shifts in the live cattle market fundamentals and contemporaneous market conditions, including price momentum, impact ability to hedge. Results reveal that thinness of the negotiated cash market, weight of cattle marketed, and contemporaneous factors statistically impact basis prediction errors. Impacts vary across region. Volatility in cost of gain and delivery costs have greater effects on basis prediction error than do market trends.

Suggested Citation

  • Coffey, Brian K. & Tonsor, Glynn T. & Schroeder, Ted C., 2018. "Impacts of Changes in Market Fundamentals and Price Momentum on Hedging Live Cattle," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 43(1), January.
  • Handle: RePEc:ags:jlaare:267607
    DOI: 10.22004/ag.econ.267607
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    References listed on IDEAS

    as
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    5. Philip Garcia & Raymond M. Leuthold & Mohamed E. Sarhan, 1984. "Basis Risk: Measurement and Analysis of Basis Fluctuations for Selected Livestock Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(4), pages 499-504.
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    11. Philip Garcia & Dwight R. Sanders, 1996. "Ex ante basis risk in the live hog futures contract: Has hedgers' risk increased?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(4), pages 421-440, June.
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    Cited by:

    1. Schroeder, Ted C. & Tonsor, Glynn T. & Coffey, Brian K., 2019. "Commodity futures with thinly traded cash markets: The case of live cattle," Journal of Commodity Markets, Elsevier, vol. 15(C), pages 1-1.

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