Hedging Effectiveness of Fertilizer Swaps

William E. Maples and B Brorsen

No 285869, 2017 Conference, April 24-25, 2017, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: One potential tool fertilizer dealers and producers have to protect themselves against fertilizer price risk is the fertilizer swaps market. Swaps usually settle using a floating variable price that is determined by an index of cash prices. This paper calculates hedge ratios and hedging effectiveness of urea and DAP (diammonium phosphate) swaps that settle using The Fertilizer Index with various spot price locations from the United States and internationally. Results show that urea and DAP swaps that settle using The Fertilizer Index perform poorly as a hedging tool over short time periods. As the hedging horizon increases, the hedging effectiveness of swaps improves.

Keywords: Marketing (search for similar items in EconPapers)
Date: 2017-04
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Journal Article: Hedging effectiveness of fertilizer swaps (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:n13417:285869

DOI: 10.22004/ag.econ.285869

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