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Uncertainty effects on production mix and on hedging decisions: The case of Brazilian ethanol and sugar

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  • Oliveira, Sydnei Marssal de
  • Ribeiro, Celma de Oliveira
  • Cicogna, Maria Paula Vieira

Abstract

The use of food crops to produce biofuels has been subject of interest in literature. The relationship between food and fuel prices can remarkably affect production strategies. These prices are subject to high uncertainty and producers must adopt hedging and storage strategies in order to avoid financial losses. This study investigates the effect of uncertainty on production, storage and hedging of ethanol and sugar in Brazilian mills.

Suggested Citation

  • Oliveira, Sydnei Marssal de & Ribeiro, Celma de Oliveira & Cicogna, Maria Paula Vieira, 2018. "Uncertainty effects on production mix and on hedging decisions: The case of Brazilian ethanol and sugar," Energy Economics, Elsevier, vol. 70(C), pages 516-524.
  • Handle: RePEc:eee:eneeco:v:70:y:2018:i:c:p:516-524
    DOI: 10.1016/j.eneco.2018.01.025
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    References listed on IDEAS

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    Keywords

    Uncertainty; Hedge strategy; Robust optimization; Production mix; Multi-product feedstock;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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