Value-at-Risk in Bakery Procurement

William W. Wilson, William Nganje and Cullen R. Hawes

Review of Agricultural Economics, 2007, vol. 29, issue 3, 581-595

Abstract: This case study applies value-at-risk methods to a bread baking company to illustrate how it can be used by a commodity processor in reporting risk, evaluating risk reduction alternatives, and setting risk limits. Results indicate that value-at-risk can be a useful tool for managing the price risk exposure in this agricultural processing firm. It provides a single measure of risk exposure and accounts for the multitude of inputs that are correlated and impact the firm's risk. Value-at-risk provides an effective tool in setting risk limits, but should be complimented with management goals, competition, and conduct within the industry.

Date: 2007
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