The white shrimp futures market: Lessons in contract design and marketing

Dwight R. Sanders and Mark Manfredo
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Dwight R. Sanders: Department of Agribusiness Economics, Southern Illinois University, Mailcode 4410, Carbondale, Illinois 62901-4410. E-mail: dwights@siu.edu, Postal: Department of Agribusiness Economics, Southern Illinois University, Mailcode 4410, Carbondale, Illinois 62901-4410. E-mail: dwights@siu.edu

Agribusiness, 2002, vol. 18, issue 4, 505-522

Abstract: The successful introduction of futures contracts to industries unfamiliar with futures markets is likely to become increasingly important as futures exchanges move to alternative governance structures (e.g., for-profit corporations), trading platforms evolve (i.e., electronic|Internet trading), and regulatory requirements relax. Here, we examine the performance of the Minneapolis Grain Exchange's white shrimp futures contract, one of the first futures contracts aimed at the aquaculture industry. Although the market structure largely conforms to the traditional criteria for a successful futures market, the contract's performance is disappointing in terms of liquidity, basis behavior, and ultimately, hedging effectiveness. Furthermore, nonpar-size delivery options embedded in the contract design likely impact basis behavior for certain hedges. While these reasons contributed to the ultimate demise of the contract, a general lack of knowledge regarding futures markets among the shrimp industry was also a factor. Given these findings, pragmatic implications for the introduction and marketing of new futures contracts into new industries are discussed. [JEL|EconLit: Q130, Q140, G130] © 2002 Wiley Periodicals, Inc.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:18:y:2002:i:4:p:505-522

DOI: 10.1002/agr.10035

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