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Innovative Hedging and Financial Services: Using Price Protection to Enhance the Availability of Agricultural Credit

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  • Braga, Francesco
  • Gear, Brian

Abstract

The use of currency translated average rate options is shown to be a cost effective way to hedge corn and soybean price risk in Ontario when the timing of the cash sales extends over several months. Standardized contracts incorporating the over-the-counter instrument may be developed, and could be offered as an add-on to an operating line of credit. Lower average commodity prices would result in a reduced principal repayment obligation. Overall this would also lead to improved credit risk and lower cost of capital.

Suggested Citation

  • Braga, Francesco & Gear, Brian, 1998. "Innovative Hedging and Financial Services: Using Price Protection to Enhance the Availability of Agricultural Credit," 1981-1999 Conference Archive 285728, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nc8191:285728
    DOI: 10.22004/ag.econ.285728
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