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How Large Is The Competitive Edge That U.S.-Based Futures Provide To U.S. Farmers?

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  • Lence, Sergio H.

Abstract

The present study advocates a simulation approach to analyze quantitatively the impact of having locally-based markets for price derivatives. A major result is that market outcomes do not appear to be sensitive to most of the underlying parameters of the model other than demand elasticity and transportation costs. For the case of inelastic demand, introduction of a futures market in a country provides domestic producers with a competitive edge if transportation costs. The most important insight of the present analysis is that, under realistic scenarios it need not be the case that local producers will gain a competitive edge over foreign producers by introducing a futures market based on the local spot prices.

Suggested Citation

  • Lence, Sergio H., 2004. "How Large Is The Competitive Edge That U.S.-Based Futures Provide To U.S. Farmers?," 2004 Annual meeting, August 1-4, Denver, CO 20371, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea04:20371
    DOI: 10.22004/ag.econ.20371
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    2. Brunner, Karl & Meltzer, Allan H., 1976. "The Phillips curve," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 1-18, January.
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