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Cross-Hedging Cottonseed Meal

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  • Rahman, Shaikh Mahfuzur
  • Turner, Steven C.
  • Costa, Ecio de Farias

Abstract

This study examines the feasibility of cross-hedging cottonseed meal with soybean meal futures. The Bayesian tests for market efficiency on the cash and futures price data soundly rejects the presence of nonstationary root. The simple linear regression of cottonseed meal cash prices on soybean meal futures provides a direct price movement relationship. Using the estimated hedge-ratios, the net realized prices are calculated for seven different cash markets. The net realized prices exhibit risk efficiency superior to cash pricing. The empirical analyses suggest that soybean meal futures can be used as a potential cross-hedging vehicle for cottonseed meal.

Suggested Citation

  • Rahman, Shaikh Mahfuzur & Turner, Steven C. & Costa, Ecio de Farias, 2000. "Cross-Hedging Cottonseed Meal," Faculty Series 16707, University of Georgia, Department of Agricultural and Applied Economics.
    • Handle: RePEc:ags:ugeocr:16707
    DOI: 10.22004/ag.econ.16707
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