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Pre-Harvest Pricing Strategies In Ohio Corn Markets: Their Effect On Returns And Cash Flow

Author

Listed:
  • Zulauf, Carl R.
  • Larson, Donald W.
  • Alexander, Christopher K.
  • Irwin, Scott H.

Abstract

This paper contributes to the debate on whether pre-harvest pricing strategies can improve returns over cash sales at harvest. It also examines cash flow needs of such strategies. The analysis is conducted for Ohio corn produced from 1986 through 1999. The pre-harvest strategies evaluated (short futures, long put, synthetic long put, put-call fence) did not statistically improve returns over cash sales at harvest. However, if implemented during or before planting, these naïve strategies reduced the standard deviation of annual gross income. Substantial cash flow may be incurred, either to establish the strategy or meet margin calls. Therefore, assessments of pre-harvest pricing strategies should include cash flow needs, along with return and risk. Key Words: cash flow risk, pre-harvest pricing strategies, price risk.

Suggested Citation

  • Zulauf, Carl R. & Larson, Donald W. & Alexander, Christopher K. & Irwin, Scott H., 2001. "Pre-Harvest Pricing Strategies In Ohio Corn Markets: Their Effect On Returns And Cash Flow," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 33(1), pages 1-13, April.
    • Handle: RePEc:ags:joaaec:15299
    DOI: 10.22004/ag.econ.15299
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    Cited by:

    1. Carl R. Zulauf & Scott H. Irwin, 1998. "Market Efficiency and Marketing to Enhance Income of Crop Producers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 20(2), pages 308-331.
    2. Neyhard, James & Tauer, Loren & Gloy, Brent, 2013. "Analysis of Price Risk Management Strategies in Dairy Farming Using Whole-Farm Simulations," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(2), pages 1-15, May.
    3. Markus Arlindo Monteiro & Bennie Grové & Nicolette Matthews, 2022. "Developing a Moving Average Crossover Strategy as an Alternative Hedging Strategy for the South Africa Maize Market," Agriculture, MDPI, vol. 12(8), pages 1-14, August.

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    Keywords

    Marketing;

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