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Hedging Effectiveness around USDA Crop Reports

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  • McKenzie, Andrew M.
  • Singh, Navinderpal

Abstract

It is well documented that “unanticipated” information contained in USDA crop reports induces large price reactions in corn and soybean markets. Thus, a natural question that arises from this literature is: To what extent are futures hedges able to remove or reduce increased price risk around report release dates? This paper addresses this question by simulating daily futures returns, daily cash returns and daily hedged returns around report release dates for two storable commodities (corn and soybeans) in two market settings (North Central Illinois and Memphis Tennessee). Various risk measures, including “Value at Risk,” are used to determine hedging effectiveness, and “Analysis of Variance” is used to uncover the underlying factors that contribute to hedging effectiveness.

Suggested Citation

  • McKenzie, Andrew M. & Singh, Navinderpal, 2008. "Hedging Effectiveness around USDA Crop Reports," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37617, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccest:37617
    DOI: 10.22004/ag.econ.37617
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    Agricultural Finance;

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