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The white shrimp futures market: Lessons in contract design and marketing

Author

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  • Dwight R. Sanders

    (Department of Agribusiness Economics, Southern Illinois University, Mailcode 4410, Carbondale, Illinois 62901-4410. E-mail: dwights@siu.edu)

  • Mark R. Manfredo

    (Morrison School of Agribusiness and Resource Management, Arizona State University East, 7001 East Williams Field Road,, Building 20, Mesa, AZ 85212. E-mail: manfredo@asu.edu)

Abstract

The successful introduction of futures contracts to industries unfamiliar with futures markets is likely to become increasingly important as futures exchanges move to alternative governance structures (e.g., for-profit corporations), trading platforms evolve (i.e., electronic|Internet trading), and regulatory requirements relax. Here, we examine the performance of the Minneapolis Grain Exchange's white shrimp futures contract, one of the first futures contracts aimed at the aquaculture industry. Although the market structure largely conforms to the traditional criteria for a successful futures market, the contract's performance is disappointing in terms of liquidity, basis behavior, and ultimately, hedging effectiveness. Furthermore, nonpar-size delivery options embedded in the contract design likely impact basis behavior for certain hedges. While these reasons contributed to the ultimate demise of the contract, a general lack of knowledge regarding futures markets among the shrimp industry was also a factor. Given these findings, pragmatic implications for the introduction and marketing of new futures contracts into new industries are discussed. [JEL|EconLit: Q130, Q140, G130] © 2002 Wiley Periodicals, Inc.

Suggested Citation

  • Dwight R. Sanders & Mark R. Manfredo, 2002. "The white shrimp futures market: Lessons in contract design and marketing," Agribusiness, John Wiley & Sons, Ltd., vol. 18(4), pages 505-522.
    • Handle: RePEc:wly:agribz:v:18:y:2002:i:4:p:505-522
    DOI: 10.1002/agr.10035
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    References listed on IDEAS

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    2. Qianqian Mao & Jens-Peter Loy & Thomas Glauben & Yanjun Ren, . "Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 0.
    3. Sanjay Mansabdar & Hussain C. Yaganti, 2023. "Optimizing Hedging Effectiveness of Indian Agricultural Commodity Futures: A Simulation Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 13-36, March.
    4. Qianqian Mao & Jens-Peter Loy & Thomas Glauben & Yanjun Ren, 2023. "Are futures markets functioning well for agricultural perishables? Evidence from China's apple futures market," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(12), pages 471-484.
    5. Fizaine, Florian, 2018. "Toward generalization of futures contracts for raw materials: A probabilistic answer applied to metal markets," Resources Policy, Elsevier, vol. 59(C), pages 379-388.

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