Inventory and Transformation Hedging Effectiveness in Corn Crushing
Recently developed ethanol futures contracts now allow direct-hedging by ethanol producers. This study examines the effectiveness of one-through eight-week hedges between 2005 and 2008. Our findings show (a) ethanol inventory hedging effectiveness is significant for two-week and longer hedges, and increases with the hedging horizon; (b) ethanol futures are significantly superior to gasoline futures for hedging ethanol price risk for two-week and longer hedges; (c) the corn crushing hedge, utilizing corn and ethanol futures, is effective and provides price risk management capabilities comparable to those provided by the soybean crush hedge.
Volume (Year): 34 (2009)
Issue (Month): 1 (April)
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- Eidman, Vernon R., 2007.
"Economic Parameters for Corn Ethanol and Biodiesel Production,"
Journal of Agricultural and Applied Economics,
Southern Agricultural Economics Association, vol. 39(02), August.
- Eidman, Vernon R., 2007. "Economic Parameters for Corn Ethanol and Biodiesel Production," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34879, Southern Agricultural Economics Association.
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- Dahlgran, Roger A., 2005. "Transaction Frequency and Hedging in Commodity Processing," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(03), December.
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