SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

This paper describes the programming procedures required to implement online homework and evaluates the application of these procedures based on use in the author's course. The description of the procedures utilizes a template showing two representative applications from the author's introductory econometrics course. In one, the students are to collect and record data and in the other, students are to perform econometric analysis on the data. The web address for the template is arec.arizona.edu/RoboTA. The use of online homework in the author's economics of futures market course revealed that the benefit-cost tradeoff is between the savings of instructional time spent grading homework and increased instructional time spent developing homework...

AN ARCH ANALYSIS OF THE HEDGING PERFORMANCE OF IMMINENTLY MATURING FUTURES CONTRACTS

Palavras-chave: Teaching/Communication/Extension/Profession.

Ano: 2002

URL: http://purl.umn.edu/36583

Hedge ratio estimation studies avoid estimating hedge ratios for imminently maturing futures contracts because of the maturity effect whereby futures price volatility increases as price uncertainty is resolved at contract expiration. This study first points out that a futures-price volatility increase is neither necessary nor sufficient for reduced hedging effectiveness because hedging effectiveness depends on the cash-futures price correlation. To analyze the hedging performance of imminently maturing futures contracts risk is defined as the conditional variance of profit outcomes. The conditional mean is modeled as Brownian motion. This model was fit to cash and futures price data for corn, cotton, feeder cattle, soybeans, soybean oil, and soybean...

Hedging Cash Flows from Commodity Processing

Palavras-chave: Maturity effect; Hedging effectiveness; Risk management; Marketing.

Ano: 2003

URL: http://purl.umn.edu/18982

Agribusinesses make long-term plant-investment decisions based on discounted cash flow. It is therefore incongruous for an agribusiness firm to use cash flow as a plant-investment criterion and then to completely discard cash flow in favor of batch profits as an operating objective. This paper assumes that cash flow and its stability is important to commodity processors and examines methods for hedging cash flows under continuous processing. Its objectives are (a) to determine how standard hedging models should be modified to hedge cash flows, (b) to outline the differences between cash flow hedging and profit hedging, and (c) to determine the effectiveness of hedging in reducing cash flow variability. A cash flow hedging methodology is developed....

COMPLETE FLEXIBILITY SYSTEMS AND THE STATIONARITY OF U.S. MEAT DEMANDS

Palavras-chave: Agribusiness; Marketing.

Ano: 2005

URL: http://purl.umn.edu/19046

Hedge Effectiveness Forecasting

A Rotterdam demand model is used to detect evidence of structural change in beef, pork, and chicken demands. The demand model is partially inverted prior to estimation to account for meat supply fixity. Estimation uses a likelihood maximization routine applied to 1950 through 1985 annual data. The results suggest severe disruption in the meat markets in the 1970s. A comparison of the 1980s and the 1960s elasticity structures reveals that income and cross-price elasticities are nearly the same but direct price elasticities are lower and are trending toward even more inelasticity. Implications for pricing and risk management are discussed.

Tipo: Journal Article

Palavras-chave: Demand and Price Analysis; Livestock Production/Industries.

Ano: 1987

URL: http://purl.umn.edu/32223

Dahlgran, Roger A.; Ma, Xudong.

This study focuses on hedging effectiveness defined as the proportionate price risk reduction created by hedging. By mathematical and simulation analysis we determine the following: (a) the regression R2 in the hedge ratio regression will generally overstate the amount of price risk reduction that can be achieved by hedging, (b) the properly computed hedging effectiveness in the hedge ratio regression will also generally overstate the amount of risk reduction that can be achieved by hedging, (c) the overstatement in (b) declines as the sample size increases, (d) application of estimated hedge ratios to non sample data results in an unbiased estimate of hedging effectiveness, (e) application of hedge ratios computed from small samples presents a significant...

The Relative Performance of In-Sample and Out-of-Sample Hedging Effectiveness Indicators

Palavras-chave: Out of sample; Post sample; Hedging; Effectiveness; Forecasts; Simulation; Agricultural Finance.

Ano: 2008

URL: http://purl.umn.edu/37604

Hedging effectiveness is the proportion of price risk removed through hedging. Empirical hedging studies typically estimate a set of risk minimizing hedge ratios, estimate the hedging effectiveness statistic, apply the estimated hedge ratios to a second group of data, and examine the robustness of the hedging strategy by comparing the hedging effectiveness for this "out-of-sample" period to the "in-sample" period. This study focuses on the statistical properties of the in-sample and out-of-sample hedging effectiveness estimators. Through mathematical and simulation analysis we determine the following: (a) the R2 for the hedge ratio regression will generally overstate the amount of price risk reduction that can be achieved by hedging, (b) the properly...

TRANSACTION FREQUENCY, INVENTORIES AND HEDGING IN COMMODITY PROCESSING

Palavras-chave: Out-of-sample; Post sample; Hedging; Effectiveness; Forecasts; Simulation; Agribusiness; Agricultural Finance; Demand and Price Analysis; Farm Management; Financial Economics; Marketing; Research Methods/ Statistical Methods; Risk and Uncertainty.

Ano: 2009

URL: http://purl.umn.edu/53042

This study examines hedging strategies for commodity processors generally and soybean crushers specifically. Processors require hedging strategies built around processing multiple batches each year. Each batch requires the purchase of inputs, transformation of inputs into outputs, and sale of the resulting output. The more batches processed, the greater the transaction frequency, the smaller each batch's size. Increased transaction frequency reduces risk because of the smaller batch size. This study distinguishes between batch (accounting) profits and periodic profits (cash flows). Traditional hedging models have focused on batch profits but we argue that hedging cash flows are also a legitimate hedging target because (a) discounted cash flow is the...

A Comparative Evaluation of Cash Flow and Batch Profit Hedging Effectiveness in Commodity Processing

Palavras-chave: Agribusiness; Marketing.

Ano: 2004

URL: http://purl.umn.edu/19012

Agribusinesses make long-term plant-investment decisions based on discounted cash flow. It is therefore incongruous for an agribusiness firm to use cash flow as a plant-investment criterion and then to completely discard cash flow in favor of batch profits as an operating objective. This paper assumes that cash flow and its stability are important to commodity processors and examines methods for hedging cash flows under continuous processing. Its objectives are (a) to determine how standard hedging models should be modified to hedge cash flows, (b) to outline the differences between cash flow hedging and profit hedging, and (c) to determine the effectiveness of hedging in reducing cash flow variability. A cash flow hedging methodology is developed....

Inventory and Transformation Hedging Effectiveness in Corn Crushing

Palavras-chave: Agribusiness; Marketing.

Ano: 2006

URL: http://purl.umn.edu/19007

INVENTORY AND TRANSFORMATION RISKS IN SOYBEAN PROCESSING

Recently developed ethanol futures contracts now allow direct-hedging by ethanol producers. This study examines the effectiveness of one-through eight-week hedges between 2005 and 2008. Our findings show (a) ethanol inventory hedging effectiveness is significant for two-week and longer hedges, and increases with the hedging horizon; (b) ethanol futures are significantly superior to gasoline futures for hedging ethanol price risk for two-week and longer hedges; (c) the corn crushing hedge, utilizing corn and ethanol futures, is effective and provides price risk management capabilities comparable to those provided by the soybean crush hedge.

Tipo: Journal Article

Palavras-chave: Corn crushing; Cross-hedging; Ethanol futures; Hedging; Processing hedge; Agricultural Finance; Crop Production/Industries.

Ano: 2009

URL: http://purl.umn.edu/50081

This study examines strategies for hedging processing operations generally and uses soybean processing as a specific example. The approach assumes a mean-variance utility function but because of the focus on hedging, the analysis concentrates on risk minimization with risk defined as the variance of the processing margin from its currently expected level. We find that risk so defined contains three components. These are (1) the risk of input/output cash price misalignment at the time of transactions, (2) the risk resulting from the firm's inability to utilize inputs and produce outputs in proportion to the mix that minimizes risk in cash market transactions, and (3) the risk of price change during the time between the purchase of inputs and the sale of...

Online Homework for Agricultural Economics Instruction: Frankenstein’s Monster or Robo TA?

Palavras-chave: Crop Production/Industries.

Ano: 2002

URL: http://purl.umn.edu/19054

AN EXAMINATION OF FUTURES PRICE DETERMINATION THROUGH THE LENS OF MARKET INTEGRATION

This paper describes the programming required for online homework, evaluates its use, and presents methods for student identification and for processing student input. Online homework applications were evaluated in a real class setting. Generally, online homework is cost effective for large classes that have numerous assignments and repeated usage. Online homework appears to increase learning through increased student study-time allocations. Students felt that online homework made course website interaction more productive. They also indicated that online homework increased their perception of the value of lectures and that its use in other courses would be welcome. All findings were highly statistically significant.

Tipo: Journal Article

Palavras-chave: Computer-aided instruction; Economics teaching methods; Instruction cost effectiveness; Online homework; Teaching/Communication/Extension/Profession; A220; G130; Q100.

Ano: 2008

URL: http://purl.umn.edu/45510

This paper develops a general model of cash and futures markets for a storable commodity. The cash market model is characterized by the incorporation of long hedged to establish contractual claims against existing inventories, which may be either short hedged or unhedged. The futures market model incorporates outright speculation as well as spread speculation. The paper then examines through mathematical analysis the characteristics these markets must possess if they are informationally efficient, if they are conformable for testing price discovery, and if they are integrated in the short or long run. Thus far results indicate that informationally efficient futures markets are characterized by any one of five conditions: (1) perfectly inelastic...

Inventory and Transformation Hedging Effectiveness in Corn Crushing

Palavras-chave: Marketing.

Ano: 2000

URL: http://purl.umn.edu/36334

In response to the development of the U.S. ethanol industry, the Chicago Board of Trade (CBOT) launched the ethanol futures contract in March 2005. This contract is promoted by the CBOT as allowing ethanol producers to hedge corn crushing using strategies similar to those used in soybean crushing. The similarities end, however, when the lack of short-term correlation between corn and ethanol prices is compared to the strong correlation between soybean and soy product prices. This contrast motivates the examination of the price risk management capabilities of the CBOT’s ethanol futures contract. Standard hedging methodology is applied to weekly cash and futures price data from March 23, 2005 through March 7, 2007. Findings include (1) for two- to eight-week...

Transaction Frequency and Hedging in Commodity Processing

Palavras-chave: Ethanol futures; Hedging; Cross hedging; Corn crushing; Processing hedge.

Ano: 2007

URL: http://purl.umn.edu/37557

TECHNOLOGY IN THE AGRICULTURAL ECONOMICS CLASSROOM: ARE WE ON THE RIGHT PATH?

This study examines the effect of transaction frequency on profit and cash flow risk for firms that periodically purchase inputs, continuously transform inputs into outputs, and periodically sell output. Soybean-processing profit and cash flows are computed for unhedged, direct-hedged, and risk-minimizing-hedged processing with up to 52 transactions per year. Findings include: (a) higher transaction frequencies result in lower unhedged profit and cash flow risk and lower hedging effectiveness, (b) anticipatory hedging provides less risk protection than product-transformation hedging, (c) stabilizing cash flow stabilizes annual profits but the converse does not hold, and (d) hedging profits makes cash flow more variable.

Tipo: Journal Article

Palavras-chave: Process hedging; Risk management; Soybean crushing; Agribusiness.

Ano: 2005

URL: http://purl.umn.edu/30985

This paper surveys the extent and application of Internet-enhanced course instruction in agricultural economics. We find that roughly thirty percent of agricultural economics courses have websites and that the purpose of these websites is to distribute course documents. We argue that this application substitutes readily for traditional teaching methods. According to production economics principles, introduction of an input that substitutes readily for an existing input will not increase production. Therefore, we would not expect course websites used in this manner to greatly enhance learning. We briefly discuss Internet-based tools that offer greater potential benefits than simple document distribution.