New generation grain contracts in corn and soybean commodity markets

Lisa Elliott, Matthew Elliott, Chad Te Slaa and Zhiguang Wang

Journal of Commodity Markets, 2020, vol. 20, issue C

Abstract: This research quantifies the risk reduction and price received when agricultural producers adopt new generation grain contracts (NGGCs) to hedge corn and soybean production. We explore the Accumulator, Average Price, Price Plus, Minimum Price, and Price Protection contracts and compare the performance measures of the average bushel price that would be received by the producer, the change in daily value of the portfolio and the Sharpe ratio. Specific to the Accumulator contract, we quantify the bushels accumulated during the contract period. We find that the Price Plus contracts performed best overall during the 2008–2017 period, obtaining the highest bushel price and the highest average Sharpe ratio for both corn and soybeans. Consequently, based on the average daily portfolio Sharpe ratio, the Price Plus contracts offered corn and soybean producers the best risk-adjusted return to hedge production during 2008–2017.

Keywords: Accumulator; Agricultural risk management; Corn; Marketing contracts; Sharpe ratio; Soybeans (search for similar items in EconPapers)
JEL-codes: G11 G13 Q02 Q13 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:20:y:2020:i:c:s2405851319300789

DOI: 10.1016/j.jcomm.2019.100113

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