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Ledger Provision in Hog Marketing Contracts

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  • Hennessy, David A.
  • Lien, Donald

Abstract

Price-dependent loan agreements at low interest rates have sometimes been included in North American hog sector long-term marketing contracts. We show that a general form of this stipulation can be viewed as a hybrid between a forward rate agreement and a bundle of commodity spot options. In some cases, the provision amounts to a commodity swap. These observations provide an approach to valuing the provision. Historical data are used to estimate expected payouts to the producer under the contract feature.

Suggested Citation

  • Hennessy, David A. & Lien, Donald, 2003. "Ledger Provision in Hog Marketing Contracts," Staff General Research Papers Archive 10645, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:10645
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    Cited by:

    1. Lien, Donald & Hennessy, David A., 2005. "Evaluating the Saskatchewan Short-Term Hog Loan Program," Staff General Research Papers Archive 12254, Iowa State University, Department of Economics.

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