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Feeder Cattle Basis Risk and Determinants

Author

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  • Bina, Justin D.
  • Schroeder, Ted C.
  • Tonsor, Glynn T.

Abstract

The feeder cattle futures contract has been criticized in recent years as not providing an effective hedging instrument. Following historically volatile cattle markets in 2014–2015, feeder cattle basis risk escalated, fueling futures contract concerns. This study assesses these concerns, utilizing weekly auction data from 32 feeder cattle markets from 1992 to 2021. Examined for the first known time, feeder cattle market variation had a statistically and economically significant influence on basis risk. Basis variation differed across regions and marketing periods. Feeder cattle basis risk was historically high in 2014–2015 but declined to levels similar to 2011 by 2018.

Suggested Citation

  • Bina, Justin D. & Schroeder, Ted C. & Tonsor, Glynn T., 2022. "Feeder Cattle Basis Risk and Determinants," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 54(1), pages 137-156, February.
    • Handle: RePEc:cup:jagaec:v:54:y:2022:i:1:p:137-156_7
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    Cited by:

    1. Sigl, Lukas & Hirschauer, Norbert, 2024. "The hedging efficiency of wheat futures in various types of farms in Germany," SocArXiv pvq9t, Center for Open Science.

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