IDEAS home Printed from https://ideas.repec.org/p/ags/aaea26/404351.html

The Fair-Weather Hedge: Dependence Shifts and Hedging Failure in Feedlot Margins

Author

Listed:
  • Lee, Siun

Abstract

Feedlot operators hedge a feeding margin that depends jointly on feeder cattle, corn, and live cattle prices, yet futures hedges lose effectiveness precisely when margins deteriorate. Using rolling Regular-Vine copulas on daily prices for the three commodities (2014–2025), this research studies the joint dependence among spot and futures markets and hedging effectiveness across profit and loss regimes. Variance based effectiveness is relatively stable, but downside effectiveness falls sharply as margins turn negative. This is driven not by the dependence structure but by the level of the margin. Because futures are approximately mean-neutral, they reshape the margin’s dispersion but cannot shift its location: when the expected margin sits below break-even, downside protection collapses even as variance reduction is preserved.

Suggested Citation

  • Lee, Siun, 2026. "The Fair-Weather Hedge: Dependence Shifts and Hedging Failure in Feedlot Margins," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404351, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404351
    DOI: 10.22004/ag.econ.404351
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/404351/files/177464_192219_115232_feedlot_triple_leg-draft.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.404351?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
    ---><---

    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:aaea26:404351. 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.

    We have no bibliographic references for this item. You can help adding them by using 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/aaeaaea.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.