Hedging Carcass Beef to Reduce the Short-Term Price Risk of Meat Packers

Document Type

Article

Journal/Book Title/Conference

Western Journal of Agricultural Economics

Volume

10

Publication Date

1985

First Page

330

Last Page

337

Abstract

Hedging in the live cattle futures market has largely been viewed as a method of reducing producer's price risk over a rather lengthy production period (three to six months). Meat packers and processors also face price risk. However, packers' and processors' price risk lies on the upside (i.e., risk is due to price increases) and is also relatively short-term (usually a few days). The possibility of reducing packers' and processors' price risk through long-hedging on the live cattle contract for a short period of time (one week) was investigated. The results suggest some potential benefits to meat packers from following a routine hedging strategy.

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