EconPapers    
Economics at your fingertips  
 

Price Responses in Forward Contracting: Do We Limit The Upside And Expose The Downside?

Keri Jacobs (), Ziran Li and Dermot Hayes ()

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: It’s a salient observation in the literature that hedgers’ net short futures positions for agricultural commodities, as reported in the Commodity Futures Trading Commission (CFTC) Disaggregated Commitment of Traders reports (DCOT), correlate strongly with futures prices. However, the DCOT data limits researchers’ ability to discern what influences producers’ hedging decisions from other activities such as storage hedges and spread trades. This is because the DCOT data aggregates open positions of all active contracts. This paper addresses this issue by examining the potential economic stimuli of corn producers’ forward contracting decisions before harvest using a unique data set of forward contracts between producers and large grain and farm supply cooperative over a five-year period. We find that producers forward price more of their crops when the futures price is trending up, and they are reluctant to hedge when the futures price is falling. We show that the producer level hedging data and the DCOT hedge series respond in a remarkably similar manner to economic stimuli despite this dissimilarity.

Date: 2016-01-01
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://lib.dr.iastate.edu/cgi/viewcontent.cgi?art ... ontext=econ_las_conf

Related works:
Working Paper: Price responses in forward contracting: do we limit the upside and expose the downside? (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:isu:genstf:201601010800001017

Access Statistics for this paper

More papers in ISU General Staff Papers from Iowa State University, Department of Economics Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070. Contact information at EDIRC.
Bibliographic data for series maintained by Curtis Balmer ().

 
Page updated 2022-01-22
Handle: RePEc:isu:genstf:201601010800001017