IDEAS home Printed from https://ideas.repec.org/a/ags/jlaare/30800.html

Post-Harvest Grain Storing And Hedging With Efficient Futures

Author

Listed:
  • Kastens, Terry L.
  • Dhuyvetter, Kevin C.

Abstract

This study simulates whether Kansas wheat, soybean, corn, and milo producers could have profitably used deferred futures plus historical basis cash price expectations for post-harvest unhedged and hedged grain storage decisions from 1985-97. The signaled storage decision is compared to a representative Kansas producer whose crop sales mimic average Kansas marketings each year. Using 23 grain price locations, the simulations resulted in an 11 cents per bushel annual increase in grain storage profits for wheat, 27 cents for soybeans, -17 cents for corn, and -20 cents for milo; however, storage profit differences varied substantially across locations. Hedging tended to decrease risk, but not impact profitability.

Suggested Citation

  • Kastens, Terry L. & Dhuyvetter, Kevin C., 1999. "Post-Harvest Grain Storing And Hedging With Efficient Futures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(2), pages 1-24, December.
    • Handle: RePEc:ags:jlaare:30800
    DOI: 10.22004/ag.econ.30800
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/30800/files/24020482.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.30800?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Robert J. Hauser & Philip Garcia & Alan D. Tumblin, 1990. "Basis Expectations and Soybean Hedging Effectiveness," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 12(1), pages 125-136.
    2. Kastens, Terry L. & Jones, Rodney D. & Schroeder, Ted C., 1998. "Futures-Based Price Forecasts For Agricultural Producers And Businesses," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), pages 1-14, July.
    3. Richard G. Heifner, 1966. "The Gains from Basing Grain Storage Decisions on Cash-Future Spreads," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(5), pages 1490-1495.
    4. Williams,Jeffrey C. & Wright,Brian D., 2005. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521023399, January.
    5. Jiang, Bingrong, 1997. "Corn and soybean basis behavior and forecasting: fundamental and alternative approaches," ISU General Staff Papers 1997010108000013213, Iowa State University, Department of Economics.
    6. Carl R. Zulauf & Scott H. Irwin, 1998. "Market Efficiency and Marketing to Enhance Income of Crop Producers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 20(2), pages 308-331.
    7. Dhuyvetter, Kevin C. & Kastens, Terry L., 1998. "Forecasting Crop Basis: Practical Alternatives," 1981-1999 Conference Archive 285711, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    8. James S. Eales & Brian K. Engel & Robert J. Hauser & Sarahelen R. Thompson, 1990. "Grain Price Expectations of Illinois Farmers and Grain Merchandisers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 701-708.
    9. Hayenga, Marvin L. & Jiang, Bingrong, 1997. "Corn and Soybean Basis Behavior and Forecasting: Fundamental and Alternative Approaches," Staff General Research Papers Archive 10400, Iowa State University, Department of Economics.
    10. Jackson, Thomas E. & Irwin, Scott H. & Good, Darrel L., 1998. "1996 Pricing Performance Of Market Advisory Services For Corn And Soybeans," AgMAS Project Research Reports 14787, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    11. Kenyon, David E. & Kingsley, Steven E., 1973. "An Analysis of Anticipatory Short Hedging Using Predicted Harvest Basis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 5(1), pages 199-203, July.
    12. Jackson, Thomas E. & Irwin, Scott H. & Good, Darrel L., 1997. "1995 Pricing Performance Of Market Advisory Services For Corn And Soybeans," AgMAS Project Research Reports 14790, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    13. Barry K. Goodwin & Terry L. Kastens, 1996. "An Analysis of Marketing Frequency by Kansas Crop Producers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 18(4), pages 575-584.
    14. Kastens, Terry L. & Schroeder, Ted C. & Plain, Ronald L., 1998. "Evaluation Of Extension And Usda Price And Production Forecasts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), pages 1-18, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Taylor, Mykel & Tonsor, Glynn & Dhuyvetter, Kevin, 2014. "Structural Change in Forward Contracting Costs for Kansas Wheat," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 39(2), pages 1-13.
    2. Taylor, Mykel & Tonsor, Glynn, 2013. "Determination of Factors Driving Risk Premiums in Forward Contracts for Kansas Wheat," 2013 Conference, April 22-23, 2013, St. Louis, Missouri 285786, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    3. Parcell, Joseph L., 2000. "The Impact Of The Ldp On Corn And Soybean Basis In Missouri," 2000 Conference, April 17-18 2000, Chicago, Illinois 18932, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    4. Kim, Sanghyo & Zulauf, Carl & Roberts, Matthew, 2015. "Forecasting Returns to Storage: The Role of Factors other than the Basis Strategy," 2015 Conference, April 20-21, 2015, St. Louis, Missouri 285828, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    5. Zulauf, Carl & Kim, Sanghyo, 2020. "U.S. Market Net Return and Risk to Storing Corn and Soybeans, 1974–2017," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2020.
    6. Siaplay, Mounir & Anderson, Kim B. & Brorsen, B. Wade, 2007. "Using Basis and Futures Prices as a Barometer in Deciding Whether to Store Grain or Not," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37575, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    7. Holmquist, Tyler & Diersen, Matthew A. & Klein, Nicole, 2016. "Relationship of Grain Stocks and Marketing Behavior," 2016 Conference, April 18-19, 2016, St. Louis, Missouri 285848, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    8. Joni M. Klumpp & B. Wade Brorsen & Kim B. Anderson, 2008. "Market Advisory Service Recommendations and Wheat Producers' Selling Decisions," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(1), pages 117-128, March.
    9. Parcell, Joseph L., 2002. "Crop Basis Patterns In The Presence Of Spatial Competition And Government Intervention," Working Papers 26043, University of Missouri Columbia, Department of Agricultural Economics.
    10. Jean Loic Begue Turon & Jean Cordier & Sandrine Hallot & Jean Baptiste Plasmans & David Weiller, 2016. "Utilisation des marchés à terme par les acteurs commerciaux exposés à la volatilité des marchés de grains et du sucre," Working Papers hal-02068381, HAL.
    11. Kim, Sanghyo & Zulauf, Carl, 2014. "Return and Risk Performance of Basis Strategy: A Case Study of Illinois Corn and Soybeans, 1975-2012 Crop Years," 2014 Conference, April 21-22, 2014, St. Louis, Missouri 285816, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    12. Stamatina, Stamatina & Banerjee, Simanti & Walters, Cory, "undated". "Safety First Risk Preferences and Post-Harvest Grain Marketing A Context-rich Lab Experiment," Cornhusker Economics 307131, University of Nebraska-Lincoln, Department of Agricultural Economics.
    13. Tomek, William G. & Peterson, Hikaru Hanawa, 2000. "Risk Management In Agricultural Markets: A Survey," 2000 Producer Marketing and Risk Management Conference, January 13-14, Orlando, FL 19580, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Yoon, Byung-Sam & Brorsen, B. Wade, 2002. "Market Inversion in Commodity Futures Prices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(3), pages 459-476, December.
    15. Peterson, Hikaru Hanawa & Tomek, William G., 2001. "Income-Enhancing And Risk-Reducing Properties Of Marketing Practices," 2001 Annual meeting, August 5-8, Chicago, IL 20613, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Taylor, Mykel R. & Dhuyvetter, Kevin C. & Kastens, Terry L., 2006. "Forecasting Crop Basis Using Historical Averages Supplemented with Current Market Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(3), pages 1-19, December.
    17. Peterson, Hikaru Hanawa & Tomek, William G., 2001. "Income Enhancing and Risk Management Properties of Marketing Practices," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18963, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kastens, Terry L. & Dhuyvetter, Kevin, 1999. "Post-Harvest Grain Storing and Hedging with Efficient Futures," 1981-1999 Conference Archive 285761, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    2. Kastens, Terry L. & Dhuyvetter, Kevin C., 1998. "Post-harvest Grain Marketing with Efficient Futures," 1981-1999 Conference Archive 285731, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    3. Dhuyvetter, Kevin C. & Kastens, Terry L., 1998. "Forecasting Crop Basis: Practical Alternatives," 1981-1999 Conference Archive 285711, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    4. Tomek, William G. & Peterson, Hikaru Hanawa, 2000. "Risk Management in Agricultural Markets: A Survey," Staff Papers 121140, Cornell University, Department of Applied Economics and Management.
    5. Sanders, Dwight R. & Manfredo, Mark R., 2006. "Forecasting Basis Levels in the Soybean Complex: A Comparison of Time Series Methods," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 38(3), pages 513-523, December.
    6. Taylor, Mykel R. & Dhuyvetter, Kevin C. & Kastens, Terry L., 2006. "Forecasting Crop Basis Using Historical Averages Supplemented with Current Market Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(3), pages 1-19, December.
    7. Peterson, Hikaru Hanawa & Tomek, William G., 2001. "Income-Enhancing And Risk-Reducing Properties Of Marketing Practices," 2001 Annual meeting, August 5-8, Chicago, IL 20613, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Kim, Sanghyo & Zulauf, Carl & Roberts, Matthew, 2015. "Forecasting Returns to Storage: The Role of Factors other than the Basis Strategy," 2015 Conference, April 20-21, 2015, St. Louis, Missouri 285828, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    9. Renyuan Shao & Brian Roe, 2003. "The design and pricing of fixed‐ and moving‐window contracts: An application of Asian‐Basket option pricing methods to the hog‐finishing sector," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 23(11), pages 1047-1073, November.
    10. Payne, Nicholas & Karali, Berna, 2015. "Can Cattle Basis Forecasts Be Improved? A Bayesian Model Averaging Approach," 2015 Conference, April 20-21, 2015, St. Louis, Missouri 285826, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    11. Kim, Sanghyo & Zulauf, Carl, 2014. "Return and Risk Performance of Basis Strategy: A Case Study of Illinois Corn and Soybeans, 1975-2012 Crop Years," 2014 Conference, April 21-22, 2014, St. Louis, Missouri 285816, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    12. Tonsor, Glynn T. & Dhuyvetter, Kevin C. & Mintert, James R., 2004. "Improving Cattle Basis Forecasting," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(2), pages 1-14, August.
    13. Parcell, Joseph L., 2000. "The Impact Of The Ldp On Corn And Soybean Basis In Missouri," 2000 Conference, April 17-18 2000, Chicago, Illinois 18932, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    14. Bullock, Shaina S. & Bullock, David W. & Wilson, William W., 2023. "Short-Term Factors Influencing Corn Export Basis Values in the Pre- and Post-COVID Periods: A Comparison of Econometric and Machine Learning Approaches," 2023 Conference, April 24-25, 2023, St. Louis, Missouri 379019, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    15. Bekkerman, Anton & Pelletier, Denis, 2009. "Basis Volatilities of Corn and Soybean in Spatially Separated Markets: The Effect of Ethanol Demand," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49281, Agricultural and Applied Economics Association.
    16. Ding, Kexin & Karali, Berna, 2019. "Basis Forecasting Performance of Composite Models: An Application to Corn and Soybean Markets," 2019 Conference, April 15-16, 2019, Minneapolis, Minnesota 309625, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    17. Good, Darrel L. & Irwin, Scott H. & Martines-Filho, Joao Gomes & Hagedorn, Lewis A., 2005. "The Pricing Performance of Market Advisory Services in Corn and Soybeans over 1995-2003," AgMAS Project Research Reports 14775, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    18. Parcell, Joseph L., 2002. "Crop Basis Patterns In The Presence Of Spatial Competition And Government Intervention," Working Papers 26043, University of Missouri Columbia, Department of Agricultural Economics.
    19. Onel, Gulcan & Karali, Berna, 2014. "Relative Performance of Semi-Parametric Nonlinear Models in Forecasting Basis," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169795, Agricultural and Applied Economics Association.
    20. Yoon, Byung-Sam & Brorsen, B. Wade, 2002. "Market Inversion in Commodity Futures Prices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 34(3), pages 459-476, December.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:jlaare:30800. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/waeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.