Cross-hedging the cottonseed crush

A case study

Research output: Contribution to journalArticle

10 Citations (Scopus)

Abstract

This article reports, without breaching confidentiality agreements, on a cross-hedging consulting study performed for a cottonseed crusher. This article’s objectives are twofold. First, it examines how futures markets should be used to hedge cottonseed crushing. The soybean crushing spread is applied in a cross-hedging context with a portfolio-risk minimization objective to develop the desired hedge ratios for a variety of cross-hedging portfolios and for several hedge horizons. The hedge ratios and hedging effectiveness statistics resulting from this analysis are reported. Second, based on follow-up discussions, this article reports on whether the recommended hedging strategies were adopted, how they were applied, the difficulties in implementing these strategies, and differences between managerial and academic perceptions of hedging strategies. This will lead to the conclusion that the economics of hedge management are as important as the underlying risk aversion in determining hedging behavior.

Original languageEnglish (US)
Pages (from-to)141-158
Number of pages18
JournalAgribusiness
Volume16
Issue number2
DOIs
StatePublished - Jan 1 2000

Fingerprint

Cottonseed Oil
crushing
cottonseed
futures trading
crushers
case studies
Confidentiality
Soybeans
futures market
statistics
Economics
management counsulting
soybeans
economics
soybean
management
hedge
Cross-hedging
Hedge
market

ASJC Scopus subject areas

  • Food Science
  • Geography, Planning and Development
  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

Cite this

Cross-hedging the cottonseed crush : A case study. / Dahlgran, Roger A.

In: Agribusiness, Vol. 16, No. 2, 01.01.2000, p. 141-158.

Research output: Contribution to journalArticle

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