This study examines hedging strategies for commodity processors generally and soybean crushers specifically. Processors require hedging strategies built around processing multiple batches each year. Each batch requires the purchase of inputs, transformation of inputs into outputs, and sale of...

Agribusinesses make long-term plant-investment decisions based on discounted cash flow. It is therefore incongruous for an agribusiness firm to use cash flow as a plant-investment criterion and then to completely discard cash flow in favor of batch profits as an operating objective. This paper...

Hedge ratio estimation studies avoid estimating hedge ratios for imminently maturing futures contracts because of the maturity effect whereby futures price volatility increases as price uncertainty is resolved at contract expiration. This study first points out that a futures-price volatility...

This paper develops a general model of cash and futures markets for a storable commodity. The cash market model is characterized by the incorporation of long hedged to establish contractual claims against existing inventories, which may be either short hedged or unhedged. The futures market...

Hedging effectiveness is the proportion of price risk removed through hedging. Empiricalhedging studies typically estimate a set of risk minimizing hedge ratios, estimate the hedgingeffectiveness statistic, apply the estimated hedge ratios to a second group of data, and examinethe robustness of...