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Hedging Feedlot Cattle: A Canadian Perspective

Author

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  • C. A. Carter
  • R. M. A. Loyns

Abstract

Empirical testing of alternative hedging strategies raises doubts about the usefulness of U.S. live cattle futures markets for cattle fed in Canada. Actual data from almost 100,000 head of custom fed cattle over a nine-year period were analyzed to test profitability and risk reduction associated with fourteen specific hedging routines. Full cost and revenue data from cattle custom fed in the three prairie provinces were used in this paper. The strategies tested were typical of those a custom feeder could use to attempt to reduce output price risk. The results indicate that hedging cattle in Canada is more complex than previous literature suggests.

Suggested Citation

  • C. A. Carter & R. M. A. Loyns, 1985. "Hedging Feedlot Cattle: A Canadian Perspective," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(1), pages 32-39.
    • Handle: RePEc:oup:ajagec:v:67:y:1985:i:1:p:32-39.
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    File URL: http://hdl.handle.net/10.2307/1240821
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    Citations

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    Cited by:

    1. Leuthold, Raymond M. & Noussinov, Mikhail A., 1999. "Optimal Hedging Strategies For The U.S. Cattle Feeder," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 17(1), pages 1-19.
    2. Robert J. Myers & Stanley R. Thompson, 1989. "Generalized Optimal Hedge Ratio Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(4), pages 858-868.
    3. Raymond M. Leuthold, 1994. "Evaluating Futures Exchanges in Liberalising Economies," Development Policy Review, Overseas Development Institute, vol. 12(2), pages 149-164, June.
    4. Lanfranco, Bruno, 1997. "Beef cattle futures markets: Is it possible in Uruguay?," Research Reports and Working Papers 310392, Instituto Nacional de Investigacion Agropecuaria (INIA).
    5. Novak, Frank & Bauer, Leonard & Dailly, Sally & Melvin, Richard, 1992. "An Analysis of Risk and Return in Hog Finishing," Project Report Series 232358, University of Alberta, Department of Resource Economics and Environmental Sociology.
    6. 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.
    7. Tabesh, Hamid, 1987. "Hedging price risk to soybean producers with futures and options: a case study," ISU General Staff Papers 1987010108000010306, Iowa State University, Department of Economics.
    8. Gary E. Bond & Stanley R. Thompson & Jane M. Geldard, 1985. "Basis Risk And Hedging Strategies For Australian Wheat Exports," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 29(3), pages 199-209, December.
    9. Mikhail A. Noussinov & Raymond M. Leuthold, 1998. "Optimal Hedging Strategies for the U.S. Cattle Feeder," Finance 9804004, University Library of Munich, Germany.
    10. Carter, Colin A., 1999. "Commodity futures markets: a survey," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(2), pages 1-39, June.
    11. Novak, Frank S. & Viney, Bruce, 1995. "Alternative Pricing and Delivery Strategies for Alberta Cattle Feeders," Project Report Series 24044, University of Alberta, Department of Resource Economics and Environmental Sociology.

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