Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices
This research examines cash forward contracting of fed cattle. for an individual feeder, a cash contract eliminates basis risk (as compared to a futures hedge). However, the disadvantage is that the contract price is estimated to be lower than the futures hedge price by $.28 - $.59/ cwt for steers a...
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Western Agricultural Economics Association
1992-07-01
|
| Series: | Journal of Agricultural and Resource Economics |
| Subjects: | |
| Online Access: | https://ageconsearch.umn.edu/record/30729 |
| _version_ | 1819081400603639808 |
|---|---|
| author | Emmett W. Elam |
| author_facet | Emmett W. Elam |
| author_sort | Emmett W. Elam |
| collection | DOAJ |
| description | This research examines cash forward contracting of fed cattle. for an individual feeder, a cash contract eliminates basis risk (as compared to a futures hedge). However, the disadvantage is that the contract price is estimated to be lower than the futures hedge price by $.28 - $.59/ cwt for steers and $.86 - $1.64.cwt for heifers. From the industry perspective, contracting appears to have a negative impact on cash prices. An increase of 1,000 head in U.S. monthly contract cattle shipments is associated with a $.003-$.009/cwt decrease in the U.S. average cash price. The negative impact of cash contracting varies by state. |
| first_indexed | 2024-12-21T20:00:11Z |
| format | Article |
| id | doaj.art-6b4b5bec3eb547ed9fda3d9aa5c9d601 |
| institution | Directory Open Access Journal |
| issn | 1068-5502 2327-8285 |
| language | English |
| last_indexed | 2024-12-21T20:00:11Z |
| publishDate | 1992-07-01 |
| publisher | Western Agricultural Economics Association |
| record_format | Article |
| series | Journal of Agricultural and Resource Economics |
| spelling | doaj.art-6b4b5bec3eb547ed9fda3d9aa5c9d6012022-12-21T18:52:00ZengWestern Agricultural Economics AssociationJournal of Agricultural and Resource Economics1068-55022327-82851992-07-0117120521710.22004/ag.econ.3072930729Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash PricesEmmett W. ElamThis research examines cash forward contracting of fed cattle. for an individual feeder, a cash contract eliminates basis risk (as compared to a futures hedge). However, the disadvantage is that the contract price is estimated to be lower than the futures hedge price by $.28 - $.59/ cwt for steers and $.86 - $1.64.cwt for heifers. From the industry perspective, contracting appears to have a negative impact on cash prices. An increase of 1,000 head in U.S. monthly contract cattle shipments is associated with a $.003-$.009/cwt decrease in the U.S. average cash price. The negative impact of cash contracting varies by state.https://ageconsearch.umn.edu/record/30729cash forward contractfed cattlefutures hedgerisk |
| spellingShingle | Emmett W. Elam Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices Journal of Agricultural and Resource Economics cash forward contract fed cattle futures hedge risk |
| title | Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices |
| title_full | Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices |
| title_fullStr | Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices |
| title_full_unstemmed | Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices |
| title_short | Cash Forward Contracting versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices |
| title_sort | cash forward contracting versus hedging of fed cattle and the impact of cash contracting on cash prices |
| topic | cash forward contract fed cattle futures hedge risk |
| url | https://ageconsearch.umn.edu/record/30729 |
| work_keys_str_mv | AT emmettwelam cashforwardcontractingversushedgingoffedcattleandtheimpactofcashcontractingoncashprices |