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Hedging Break-Even Biodiesel Production Costs Using Soybean Oil Futures

Author

Listed:
  • Graf, Johannes
  • McKenzie, Andrew M.
  • Popp, Michael P.

Abstract

The effectiveness of hedging volatile input prices for biodiesel producers is examined over one- to eight-week time horizons. Results reveal that hedging break-even soybean costs with soybean oil futures offers significant reductions in input price risk. The degree of risk reduction is dependent upon type of hedge, naïve or risk-minimizing, and upon time horizon. In contrast, cross-hedging break-even poultry fat costs with soybean oil futures failed to reduce input price risk.

Suggested Citation

  • Graf, Johannes & McKenzie, Andrew M. & Popp, Michael P., 2008. "Hedging Break-Even Biodiesel Production Costs Using Soybean Oil Futures," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 26(1), pages 1-15.
    • Handle: RePEc:ags:jloagb:90553
    DOI: 10.22004/ag.econ.90553
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    References listed on IDEAS

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    1. Tiffany, Douglas G., 2001. "Biodiesel: A Policy Choice For Minnesota," Staff Papers 13437, University of Minnesota, Department of Applied Economics.
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    Cited by:

    1. Franken, Jason R.V. & Irwin, Scott H. & Garcia, Philip, 2021. "Biodiesel hedging under binding renewable fuel standard mandates," Energy Economics, Elsevier, vol. 96(C).

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