Rollover Hedging and Missing Long-Term Futures Markets

Bruce Gardner

American Journal of Agricultural Economics, 1989, vol. 71, issue 2, 311-318

Abstract: Sequential rollover of annual futures positions provides farmers or others with a means of long-term hedging. Consequently, the absence of multiyear futures markets may not be a serious problem. However, year-to-year basis risk exists which can render rollovers ineffective in hedging. Evidence on soybean, corn, and cotton futures suggests that rollovers would be effective at locking in an initial price for a three- to six-year period but would be ineffective in routine hedging over a series of successive three- to six-year periods.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:71:y:1989:i:2:p:311-318.

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