HEDGING SPOT CORN: AN EXAMINATION OF THE MINNEAPOLIS GRAIN EXCHANGE'S CASH SETTLED CORN CONTRACT

Dwight R. Sanders and Tracy D. Greer

No 19064, 2002 Conference, April 22-23, 2002, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: This research examines the potential basis behavior and hedging effectiveness for the Minneapolis Grain Exchange's (MGE) cash settled corn contract. MGE futures cash settle to the National Corn Index (NCI) calculated by Data Transmission Network (DTN). Focusing on seven regions in Illinois, the data suggest that NCI Futures offer potential advantages over the existing Chicago Board of Trade (CBOT) corn futures. In particular, nearby basis variability could be reduced by nearly one-half from 8.8 cents per bushel to 4.5 cents per bushel, and hedging effectiveness may increase from an average of 80% for the CBOT to 93% for the NCI.

Keywords: Crop Production/Industries; Marketing (search for similar items in EconPapers)
Pages: 11
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrtwo:19064

DOI: 10.22004/ag.econ.19064

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