Hedging Spot Corn: An Examination Of The Minneapolis Grain Exchange'S Cash Settled Corn Contract
This research examines the potential basis behavior and hedging effectiveness for the Minneapolis Grain Exchange's (MGE's) cash settled corn contract. MGE futures cash settle to the National Corn Index (NCI) calculated by the Data Transmission Network (DTN). Focusing on seven regions in Illinois, the data suggest that NCI futures offer potential advantages over the existing Chicago Board of Trade (CBOT) corn futures. In particular, nearby basis variability could be reduced by 4Â¢ per bushel from 8.6Â¢ to 4.6Â¢ per bushel, and unconditional hedging effectiveness may increase from an average of 79% for the CBOT to 93% for the NCI. These results are statistically significant, and likely to be economically important given that agribusiness firms such as grain merchandisers and country elevators traditionally have very low margins.
Volume (Year): 21 (2003)
Issue (Month): 1 ()
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