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Marketing Strategies in the Canadian Beef Sector

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  • Frank, Julieta
  • Brewin, Derek

Abstract

The Canadian beef sector has undergone a structural change since the outbreak of BSE in 2003 and a higher U.S./Canadian dollar exchange rate variability. Hedging beef prices and the U.S. dollar using the futures market may help producers and other beef market participants to alleviate some of their price risk. We assess the hedging usefulness of the CME Group futures contract in total price risk reduction for Canadian cattle market participants and we examine the implications of exchange rate variability on optimal commodity hedging. Futures hedging after BSE removes approximately 35% of the risk, and a combined commodity and currency hedge after BSE was discovered removes approximately 50% of the risk. Hedge ratios are in general low, approximately 0.29 when a combined cattle-currency hedge is performed.

Suggested Citation

Handle: RePEc:ags:nccc11:285342
DOI: 10.22004/ag.econ.285342
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