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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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    2. Dickinson, David L. & Bailey, DeeVon, 2002. "Meat Traceability: Are U.S. Consumers Willing To Pay For It?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(02), December.
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    12. Hilliard, Jimmy E. & Reis, Jorge, 1998. "Valuation of Commodity Futures and Options under Stochastic Convenience Yields, Interest Rates, and Jump Diffusions in the Spot," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(01), pages 61-86, March.
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    Cited by:

    1. Donald Lien & David A. Hennessy, 2005. "Evaluating the Saskatchewan Short-Term Hog Loan Program," Food and Agricultural Policy Research Institute (FAPRI) Publications 05-wp385, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    2. Todd Sandler, 1998. "Global and regional public goods: a prognosis for collective action," Fiscal Studies, Institute for Fiscal Studies, vol. 19(3), pages 221-247, August.
    3. Donald Lien & David A. Hennessy, 2005. "Evaluating the Saskatchewan Short-Term Hog Loan Program," Food and Agricultural Policy Research Institute (FAPRI) Publications 05-wp385, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.

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