THE FEASIBILITY OF A BOXED BEEF FUTURES CONTRACT: HEDGING WHOLESALE BEEF CUTS

Fabio Mattos, Philip Garcia, Raymond M. Leuthold and Tony Hahn

No 18986, 2003 Conference, April 21-22, 2003, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: The purpose of this paper is to investigate the feasibility of a new futures contract for hedging wholesale transactions in the beef industry based on the USDA boxed beef cutout index (BBCO). The results suggest the live cattle futures contract is not an adequate tool to manage the price risk of wholesale meat transactions in the beef industry. However, a futures contract based on the BBCO index might provide considerably more opportunities for the hedging of wholesale meat cut prices. A pattern of improved hedging effectiveness at more distant horizons also appears to emerge for the individual cuts of meat using the conditional hedge procedures. These results may be of particular interest to members of the meat industry with longer planning horizons, and more diversified transactions.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 13
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrthr:18986

DOI: 10.22004/ag.econ.18986

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