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The Feasibility Of A Boxed Beef Futures Contract: Hedging Wholesale Beef Cuts

Author

Listed:
  • Mattos, Fabio
  • Garcia, Philip
  • Leuthold, Raymond M.
  • Hahn, Tony

Abstract

The purpose of this paper is to investigate the feasibility of a new futures contract for hedging wholesale transactions in the beef industry based on the USDA boxed beef cutout index (BBCO). The results suggest the live cattle futures contract is not an adequate tool to manage the price risk of wholesale meat transactions in the beef industry. However, a futures contract based on the BBCO index might provide considerably more opportunities for the hedging of wholesale meat cut prices. A pattern of improved hedging effectiveness at more distant horizons also appears to emerge for the individual cuts of meat using the conditional hedge procedures. These results may be of particular interest to members of the meat industry with longer planning horizons, and more diversified transactions.

Suggested Citation

  • Mattos, Fabio & Garcia, Philip & Leuthold, Raymond M. & Hahn, Tony, 2003. "The Feasibility Of A Boxed Beef Futures Contract: Hedging Wholesale Beef Cuts," 2003 Conference, April 21-22, 2003, St. Louis, Missouri 18986, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:ncrthr:18986
    DOI: 10.22004/ag.econ.18986
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    Citations

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    Cited by:

    1. Steiner, Bodo E., 2007. "Formal beef alliances and alignment challenges: issues in contracting, pricing and quality," Project Report Series 7709, University of Alberta, Department of Resource Economics and Environmental Sociology.
    2. Jason R. V. Franken & Scott H. Irwin, 2024. "Revisiting biodiesel hedging," Agribusiness, John Wiley & Sons, Ltd., vol. 40(4), pages 1002-1015, October.
    3. Ardian Harri & John Michael Riley & John D. Anderson & Keith H. Coble, 2009. "Managing economic risk in value‐based marketing of fed cattle," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 295-306, May.
    4. Franken, Jason R.V. & Irwin, Scott H. & Garcia, Philip, 2021. "Biodiesel hedging under binding renewable fuel standard mandates," Energy Economics, Elsevier, vol. 96(C).

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    Keywords

    Marketing;

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