Organic Wheat Prices and Premium Uncertainty: Can Cross Hedging and Forecasting Play a Role?

Authors

Tatiana Drugova, Utah State UniversityFollow
Veronica F. Pozo, Utah State UniversityFollow
Kynda R. Curtis, Utah State UniversityFollow
T. Randall Fortenbery, Washington State University

Document Type

Article

Journal/Book Title/Conference

Journal of Agricultural and Resource Economics

Volume

44

Issue

3

Publisher

Western Agricultural Economics Association

Publication Date

9-2019

First Page

551

Last Page

570

Abstract

We compare the volatility of organic wheat prices to that of conventional wheat prices using historical measures. To reduce uncertainty, we examine the possibility of cross hedging using conventional wheat futures and the ability of futures to forecast the organic premium. Results provide evidence that conventional futures can be used to cross hedge organic wheat price risk, but results depend on the method used to impute the missing values. We also find a long-run equilibrium relationship between organic wheat prices and conventional wheat futures prices. Finally, futures prices contain some information useful in predicting organic prices in the short run.

Recommended Citation

Drugova, Tatiana, Pozo, Veronica, Curtis, Kynda, and Fortenbery, T. Randall. "Organic Wheat Prices and Premium Uncertainty: Can Cross Hedging and Forecasting Play a Role." Journal of Agricultural and Resource Economics, vol. 44, no. 3, pp. 551-570. https://doi.org/10.22004/ag.econ.292331