Hedging Carcass Beef to Reduce the Short-Term Price Risk of Meat Packers
Western Journal of Agricultural Economics
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.
Bailey, DeeVon, and B. Wade Brorsen. Hedging Carcass Beef to Reduce the Short-Term Price Risk of Meat Packers. Western Journal of Agricultural Economics 10(1985):330-7.