LEDGER PROVISION IN HOG MARKETING CONTRACTS

David A. Hennessy and Donald Lien

No 18337, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: Some long-term marketing contracts in the North American hog sector provide for price-dependent loan agreements at low rates. We show that these provisions linking pricing with financing are hybrids between forward rate agreements and commodity options. This observation presents approaches for valuing the stipulations. We suggest that the ledger arrangement is transaction-cost efficient, especially for a packer with a natural partial pass-through hedge from retail market positions.

Keywords: Livestock Production/Industries; Marketing (search for similar items in EconPapers)
Pages: 13
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ags:hebarc:18337

DOI: 10.22004/ag.econ.18337

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