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Oscillators As Decision Guides in Hedging Feeder Cattle: An Economic Evaluation

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  • Russell, James R.
  • Franzmann, John R.

Abstract

In recent years, extremely variable price movements have caused a high degree of price risk in the cattle industry. Cattle producers who chose to accept this price risk at the correct time had extraordinary gains, whereas those who accepted this risk at the improper time had returns below cost of production. Hedging offers the cattle producer an excellent opportunity to transfer a portion of the price risk to another party. Selective transfer of the risk can both increase the magnitude of returns and decrease their variance [1, 2, 4]. The family of technical tools called oscillators, one of the most useful tools employed by commodity traders [6, p. 34], was used to develop hedging strategies for feeder cattle.

Suggested Citation

  • Russell, James R. & Franzmann, John R., 1979. "Oscillators As Decision Guides in Hedging Feeder Cattle: An Economic Evaluation," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 11(1), pages 83-88, July.
    • Handle: RePEc:cup:jagaec:v:11:y:1979:i:01:p:83-88_01
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    Cited by:

    1. Ziehm, William Walter, 1986. "An evaluation of alternative hedging strategies for Iowa cattle feeders: before, at, and after placement, 1974-1984," ISU General Staff Papers 1986010108000018118, Iowa State University, Department of Economics.
    2. Wes Harrison, R. & Bobst, Barry W. & Benson, Fred J. & Meyer, Lee, 1996. "Analysis of the Risk Management Properties of Grazing Contracts Versus Futures and Option Contracts," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 28(2), pages 247-262, December.
    3. Harrison, R. Wes, 1998. "Stochastic Dominance Analysis Of Futures And Option Strategies For Hedging Feeder Cattle," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(2), pages 1-11, October.
    4. Bobst, Barry W. & Grunewald, Orlen C. & Davis, Joe T., 1982. "Efficient Cash And Hedged Enterprise Combinations In Feeder Calf Backgrounding Operations," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 14(2), pages 1-6, December.
    5. Russell, James R. & Dickey, Matthew C., 1983. "Using Dual Objectives As Decision Guides To Hedge Oklahoma Feeder Cattle - An Economic Evaluation," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 15(2), pages 1-5, December.

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