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Improving Cattle Basis Forecasting

Glynn Tonsor (), Kevin Dhuyvetter () and James Mintert ()

Journal of Agricultural and Resource Economics, 2004, vol. 29, issue 2, 14

Abstract: Successful risk management strategies for agribusiness firms based on futures and options contracts are contingent on their ability to accurately forecast basis. This research addresses three primary questions as they relate to basis forecasting accuracy: (a) What is the impact of adopting a time-to-expiration approach, as compared to the more common calendar-date approach? (b) What is the optimal number of years to include in calculations when forecasting livestock basis using historical averages? and (c) What is the effect of incorporating current basis information into a historical-average-based forecast? Results indicate that use of the time-to-expiration approach has little impact on forecast accuracy compared to using a simple calendar approach, but forecast accuracy is improved by incorporating at least a portion of current basis information into basis forecasts.

Keywords: Livestock; Production/Industries (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ags:jlaare:31115

DOI: 10.22004/ag.econ.31115

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