The Cost of Forward Contracting in CIF NOLA Export Bid Market

Bradley Isbell, Andy M. McKenzie and B Brorsen

No 285871, 2017 Conference, April 24-25, 2017, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: Price risk management in the grain industry is typically done by hedging with forward contracts and futures contracts. An additional important price discovery and risk management “paper market” also exists in the form of CIF NOLA basis bids, traded through brokers. These bids function similar to traditional forward contracts, however, like a futures market, firms can offset their forward contractual obligations by offsetting positions in a liquid off-exchange paper market. Analysis shows that this liquidity mostly removes the pricing bias commonly found in forward contracting in corn and soybeans, although a small bias still exists in wheat and especially sorghum.

Keywords: Marketing (search for similar items in EconPapers)
Date: 2017-04
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Related works:
Journal Article: THE COST OF FORWARD CONTRACTING IN THE CIF NOLA EXPORT BID MARKET (2019)
Journal Article: The Cost of Forward Contracting in the CIF NOLA Export Bid Market
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Persistent link: https://EconPapers.repec.org/RePEc:ags:n13417:285871

DOI: 10.22004/ag.econ.285871

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