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Biodiesel Cross-Hedging Opportunities

Author

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  • Franken, Jason R.V.
  • Irwin, Scott H.
  • Garcia, Phil

Abstract

We apply an encompassing framework to assess the viability of hedging spot biodiesel price risk for four U.S. markets with a conventionally used heating oil futures contract and a soybean oil futures contract based on the logic that supply shifts (i.e., price of soybean oil as an input) drive biodiesel prices when binding blending mandates are in place. Results indicate that soybean oil futures should in fact be part of a composite hedge, and that in some instances greater hedging weight should be placed on the soybean oil futures contract than the conventionally used heating oil futures contract.

Suggested Citation

  • Franken, Jason R.V. & Irwin, Scott H. & Garcia, Phil, 2020. "Biodiesel Cross-Hedging Opportunities," 2020 Conference, St. Louis, Missouri 309640, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc20:309640
    DOI: 10.22004/ag.econ.309640
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