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Cash Forward Contracting Versus Hedging Of Fed Cattle, And The Impact Of Cash Contracting On Cash Prices

  • Elam, Emmett W.
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    This research examines cash forward contracting of fed cattle. For an individual feeder, a cash contract eliminates basis risk (as compared to a futures hedge). However, the disadvantage is that the contract price is estimated to be lower than the futures hedge price by $.28 - $.59/ cwt for steers and $.86 - $1.64.cwt for heifers. From the industry perspective, contracting appears to have a negative impact on cash prices. An increase of 1,000 head in U.S. monthly contract cattle shipments is associated with a $.003—$.009/cwt decrease in the U.S. average cash price. The negative impact of cash contracting varies by state.

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    File URL: http://purl.umn.edu/30729
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    Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

    Volume (Year): 17 (1992)
    Issue (Month): 01 (July)
    Pages:

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    Handle: RePEc:ags:jlaare:30729
    Contact details of provider: Web page: http://waeaonline.org/

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    1. Shah, Samarth & Brorsen, B. Wade & Anderson, Kim B., 2009. "Liquidity Costs in Futures Options Markets," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53047, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
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