Biodiesel Cross-Hedging Opportunities

Jason R.V. Franken, Scott H. Irwin and Phil Garcia

No 309640, 2020 Conference, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: We apply an encompassing framework to assess the viability of hedging spot biodiesel price risk for four U.S. markets with a conventionally used heating oil futures contract and a soybean oil futures contract based on the logic that supply shifts (i.e., price of soybean oil as an input) drive biodiesel prices when binding blending mandates are in place. Results indicate that soybean oil futures should in fact be part of a composite hedge, and that in some instances greater hedging weight should be placed on the soybean oil futures contract than the conventionally used heating oil futures contract.

Keywords: Agribusiness (search for similar items in EconPapers)
Pages: 14
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccc20:309640

DOI: 10.22004/ag.econ.309640

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