Cross-Hedging Distillers Dried Grains Using Corn and Soybean Meal Futures Contracts

Adam J. Brinker, Joe Parcell (), Kevin Dhuyvetter () and Jason R.V. Franken

Journal of Agribusiness, 2009, vol. 27, issue 01-2, 15

Abstract: Ethanol mandates have led to an increase in the production of distillers dried grains (DDGs), a co-product of ethanol production that is incorporated into livestock rations. As with most competitive industries, there is some level of price risk in handling DDGs, and there is no DDG futures contract available for managing price risk. Commonly, DDGs are hedged using only corn futures. Our results suggest that cross-hedge risk may be reduced by including soybean meal futures in an encompassing cross-hedge strategy. Further, we also conclude soybean meal futures currently may be slightly more effective at reducing risk than in the past.

Keywords: Agribusiness; Demand and Price Analysis (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:jloagb:90654

DOI: 10.22004/ag.econ.90654

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