Organic Wheat Prices and Premium Uncertainty: Can Cross Hedging and Forecasting Play a Role?

Tatiana Drugova, Veronica F. Pozo, Kynda R. Curtis and T. Randall Fortenbery

Journal of Agricultural and Resource Economics, 2019, vol. 44, issue 3

Abstract: We compare the volatility of organic wheat prices to that of conventional wheat prices using historical measures. To reduce uncertainty, we examine the possibility of cross hedging using conventional wheat futures and the ability of futures to forecast the organic premium. Results provide evidence that conventional futures can be used to cross hedge organic wheat price risk, but results depend on the method used to impute the missing values. We also find a long-run equilibrium relationship between organic wheat prices and conventional wheat futures prices. Finally, futures prices contain some information useful in predicting organic prices in the short run.

Keywords: Demand and Price Analysis; Crop Production/Industries (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:ags:jlaare:292331

DOI: 10.22004/ag.econ.292331

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