IMPACT OF CASH SETTLEMENT ON FEEDER CATTLE BASIS

David E. Kenyon, Bruce Bainbridge and Robin Ernst

Western Journal of Agricultural Economics, 1991, vol. 16, issue 01, 13

Abstract: The feeder cattle futures contract specifications were changed in 1986 from physical delivery to cash settlement. The Chicago Mercantile Exchange expected this change to reduce basis variability and improve the ability of hedgers to predict basis. This study analyzes the basis for individual lots of feeder cattle before and after cash settlement. Basis equations were estimated by breed, sex, weight, grade, and season. These equations were used to predict basis. The results indicate basis variability was not reduced and hedger ability to forecast basis, in general, was not improved significantly under cash settlement compared to physical delivery.

Keywords: Marketing (search for similar items in EconPapers)
Date: 1991
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:wjagec:32624

DOI: 10.22004/ag.econ.32624

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