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Cross Hedging Winter Canola

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  • KIM, SEON-WOONG
  • BRORSEN, B. WADE
  • YOON, BYUNG-SAM

Abstract

The growth in winter canola acreage in the southern Great Plains has led to questions about the best way to reduce price risk because there is no U.S. canola futures market. Cross-hedge ratios and hedging effectiveness are calculated, and encompassing tests are conducted for short-horizon hedging. Possible cross-hedge markets considered are U.S. soybeans, soybean oil, soybean meal, hard red winter wheat, and Canadian canola. The selected cross hedge is a combination of soybean oil and meal futures, but its hedging effectiveness is substantially less than what is typically provided by a direct hedge.

Suggested Citation

  • Kim, Seon-Woong & Brorsen, B. Wade & Yoon, Byung-Sam, 2015. "Cross Hedging Winter Canola," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 47(4), pages 462-481, November.
    • Handle: RePEc:cup:jagaec:v:47:y:2015:i:04:p:462-481_00
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    Cited by:

    1. K. Abhaya Kumar & Prakash Pinto & Iqbal Thonse Hawaldar & K. G. Ramesh, 2021. "Can Crude Oil Futures be the Good Hedging Tool for Tyre Equities? Evidence from India," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 523-537.
    2. Białkowski, Jędrzej & Bohl, Martin T. & Perera, Devmali, 2023. "Commodity futures hedge ratios: A meta-analysis," Journal of Commodity Markets, Elsevier, vol. 30(C).
    3. Jędrzej Białkowski & Martin T. Bohl & Devmali Perera, 2022. "Commodity Futures Hedge Ratios: A Meta-Analysis," Working Papers in Economics 22/12, University of Canterbury, Department of Economics and Finance.

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