Three articles concerning risk management in the meat industry

Formulating strategies to mitigate price risk has become a major concern for meat industry managers. Increased price volatility and the demand for fixed price commitments from large buyers present wholesalers with growing challenges to remaining both competitive and profitable;The first two articles examine cross-hedging as a potential means to hedge price risks for beef and pork products (respectively) which do not have a corresponding futures contract. Hedging ratios are developed using simple linear regression techniques for a variety of commonly purchased meat products. An estimation and description of the basis risk involved in hedging these products is also presented. Finally, examples of typical cross-hedging strategies using the results obtained in each article are developed and discussed;The third article incorporates profit target motives and meat industry manager's feelings regarding deviations from these targets into the formulation of purchasing and inventory strategies. A risk-return model of purchase strategy is developed such that risk is measured with reference to expected outcomes below target, and return is measured with reference to expected outcomes above target.