THE ABILITY OF THE FUTURES MARKET TO FORECAST PROFIT MARGINS IN THE BROILER INDUSTRY

David E. Kenyon and Neil P. Shapiro

No 283856, 1976 Annual Meeting, August 15-18, State College, Pennsylvania from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: The typical vertically integrated broiler firm is faced with variable input costs, primarily corn and soybean meal, and variable sales revenues from selling its output, iced broilers, in the cash market. Therefore, the profit margins for the integrators can fluctuate widely from week to week. To cope with this situation broiler integrators can use the futures market to simultaneously lock-in the price of corn and soybean meal and the price of broilers therefore locking-in a profit margin. To lock-in this margin, the integrator buys corn and meal futures to set feed costs, and sells broiler futures to set the selling price of his broilers.

Keywords: Livestock; Production/Industries (search for similar items in EconPapers)
Pages: 14
Date: 1976-08
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea76:283856

DOI: 10.22004/ag.econ.283856

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