Cash Forward Contracting Versus Hedging of Fed Cattle, and the Impact of Cash Contracting on Cash Prices
Year: 1992
Type: article
Abstract: 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.
Authors: Elam, Emmett W., Elam, Emmett W.
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
SDG: Zero hunger
Open Access status: green
OpenAlex ID: W1484979356