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Did Producer Hedging Opportunities in the Live Hog Contract Decline?

  • Fabio C. Zanini

    (The University of Illinois, Urbana- Champaign)

  • Philip Garcia

    (The University of Illinois, Urbana- Champaign)

Registered author(s):

    The paper assesses the usefulness of selective hedging strategies when combined with forecast techniques in the live hog contract. The use of routine futures and options hedging is not attractive relative to a cash-only strategy. However, forecasting and hedging can contribute to price risk management improvement for risk-averse producers. Consistent with previous research, the results indicate that the live hog contract continues to offer producers attractive pricing opportunities. The findings suggests that the success of the new lean value carcass contract may depend on its ability to attract trading volume from outside the traditional production sector.

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    File URL: http://128.118.178.162/eps/fin/papers/9712/9712005.pdf
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    Paper provided by EconWPA in its series Finance with number 9712005.

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    Length: 14 pages
    Date of creation: 16 Dec 1997
    Date of revision:
    Handle: RePEc:wpa:wuwpfi:9712005
    Note: Type of Document - pdf ; prepared on PC; to print on HP Laserjet; pages: 14; figures: included. Office for Futures and Options Research (OFOR) at the University of Illinois, Urbana-Champaign. Working Paper 97-05. For a complete list of OFOR working papers see
    Contact details of provider: Web page: http://128.118.178.162

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    1. Karl D. Skold & Eric Grundmeier & Stanley R. Johnson, 1989. "CARD Livestock Model Documentation: Pork," Food and Agricultural Policy Research Institute (FAPRI) Publications 88-tr4, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    2. Philip Garcia & Dwight R. Sanders, 1996. "Ex ante basis risk in the live hog futures contract: Has hedgers' risk increased?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(4), pages 421-440, 06.
    3. Karl D. Skold & Eric Grundmeier & Stanley R. Johnson, 1989. "CARD Livestock Model Documentation: Pork," Center for Agricultural and Rural Development (CARD) Publications 88-tr4, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. Matthew T. Holt & Jon A. Brandt, 1985. "Combining price forecasting with hedging of hogs: An evaluation using alternative measures of risk," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 5(3), pages 297-309, 09.
    5. Brian D. Adam & Philip Garcia & Robert J. Hauser, 1993. "Robust live hog pricing strategies under uncertain prices and risk preferences," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 13(8), pages 849-864, December.
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