Comparison of Selective Hedging and Option Strategies in Cattle Feed Lot Risk Management

Marvin L. Hayenga and Ted Schroeder

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: A cattle feedlot marketing simulation model was developed and used to evaluate the performance of various feedlot marketing strategies. The marketing analysis included corn, feeder cattle, and fed cattle integrated marketing alternatives. A variety of strategies were compared including hedging and put option purchasing as signaled via profit margins or price forecasts. The results indicate that cattle feeders could have historically increased profitability and decreased the variability of profits through selective marketing by using either profit margins or price forecasts to signal market positions as compared to cash marketing strategies. In addition, several strategies were found that stochastically dominated cash marketing.

Date: 1988-04-01
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Citations: View citations in EconPapers (8)

Published in Journal of Futures Markets, April 1988, vol. 8 no. 2

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Journal Article: Comparison of selective hedging and options strategies in cattle feedlot risk management (1988)
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