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An Analysis of Anticipatory Short Hedging Using Predicted Harvest Basis

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  • Kenyon, David E.
  • Kingsley, Steven E.

Abstract

The use of the futures market as an aid in marketing farm commodities has been gaining in popularity among producers. Current hedging practices are largely based on average basis or basis movement over some historical time period. The difficulty with this approach is that the year to year variation in the calculated basis is large and using the mean value to predict basis in a given year does not give a highly accurate estimate. The objectives of this study were: (1) to determine if regression analysis could be used to accurately predict the harvest basis at planting time, and (2) to evaluate the performance of alternative hedging strategies using historical average basis estimates versus basis estimates based on regression analysis.

Suggested Citation

  • Kenyon, David E. & Kingsley, Steven E., 1973. "An Analysis of Anticipatory Short Hedging Using Predicted Harvest Basis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 5(1), pages 199-203, July.
    • Handle: RePEc:cup:jagaec:v:5:y:1973:i:01:p:199-203_01
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    Cited by:

    1. Hatchett, Robert B. & Brorsen, B. Wade & Anderson, Kim B., 2010. "Optimal Length of Moving Average to Forecast Futures Basis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(1), pages 1-16.
    2. Taylor, Mykel R. & Dhuyvetter, Kevin C. & Kastens, Terry L., 2006. "Forecasting Crop Basis Using Historical Averages Supplemented with Current Market Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(3), pages 1-19, December.
    3. Kastens, Terry L. & Dhuyvetter, Kevin C., 1999. "Post-Harvest Grain Storing And Hedging With Efficient Futures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(2), pages 1-24, December.

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