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Value-at-Risk in Bakery Procurement

Author

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  • William W. Wilson
  • William E. Nganje
  • Cullen R. Hawes

Abstract

This case study applies value-at-risk methods to a bread baking company to illustrate how it can be used by a commodity processor in reporting risk, evaluating risk reduction alternatives, and setting risk limits. Results indicate that value-at-risk can be a useful tool for managing the price risk exposure in this agricultural processing firm. It provides a single measure of risk exposure and accounts for the multitude of inputs that are correlated and impact the firm's risk. Value-at-risk provides an effective tool in setting risk limits, but should be complimented with management goals, competition, and conduct within the industry. Copyright 2007, Oxford University Press.

Suggested Citation

  • William W. Wilson & William E. Nganje & Cullen R. Hawes, 2007. "Value-at-Risk in Bakery Procurement," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 581-595.
    • Handle: RePEc:oup:revage:v:29:y:2007:i:3:p:581-595
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2007.00373.x
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    References listed on IDEAS

    as
    1. Wilson, William W. & Wagner, Robert & Nganje, William E., 2003. "Strategic Hedging For Grain Processors," Agribusiness & Applied Economics Report 23637, North Dakota State University, Department of Agribusiness and Applied Economics.
    2. Bullock, David W. & Wilson, William W. & Dahl, Bruce L., 2007. "Strategic use of futures and options by commodity processors," International Review of Economics & Finance, Elsevier, vol. 16(4), pages 578-591.
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    Cited by:

    1. Abdoul G. Sam, 2010. "Nonparametric estimation of market risk: an application to agricultural commodity futures," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 70(2), pages 285-297, August.
    2. Songjiao Chen & William W. Wilson & Ryan Larsen & Bruce Dahl, 2015. "Investing in Agriculture as an Asset Class," Agribusiness, John Wiley & Sons, Ltd., vol. 31(3), pages 353-371, June.
    3. Al Janabi, Mazin A.M., 2012. "Optimal commodity asset allocation with a coherent market risk modeling," Review of Financial Economics, Elsevier, vol. 21(3), pages 131-140.
    4. Wyn Morgan & John Cotter & Kevin Dowd, 2012. "Extreme Measures of Agricultural Financial Risk," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(1), pages 65-82, February.
    5. Songjiao Chen & William Wilson & Ryan Larsen & Bruce Dahl, 2016. "Risk Management for Grain Processors and “Copulas”," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(2), pages 365-382, June.

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    1. Songjiao Chen & William Wilson & Ryan Larsen & Bruce Dahl, 2016. "Risk Management for Grain Processors and “Copulas”," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 64(2), pages 365-382, June.
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