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Date Available
12-7-2011
Year of Publication
2006
Document Type
Thesis
College
Agriculture
Department/School/Program
Agricultural Economics
Faculty
A. Lee Meyer
Abstract
Kentucky plays a vital role in the beef supply chain. The cow/calf producers,back-grounding operations, and order buying industry are important parts of Kentucky'sagricultural economy. Basis risk is an issue that affects these groups in a negative way. Agood estimate of the expected basis must be available to make hedging efficient.Simulations were performed on Kentucky price data to determine the effectiveness ofshort hedging for Kentucky producers. A model was also used to describe some of thefactors that determine basis levels. The research revealed that it is difficult to predictbasis within an acceptable range to make short hedging with futures efficient. Eventhough short hedging reduced variability in net price, it was difficult to lock in a profit.Various options and spread strategies were presented as alternative hedging tools thatwould protect cattle producers from unexpected price declines.
Recommended Citation
Routt, Nathaniel J., "BASIS VARIABILITY AND ITS EFFECTS ON HEDGING EFFICIENCY FOR KENTUCKY FEEDER CATTLE" (2006). University of Kentucky Master's Theses. 177.
https://uknowledge.uky.edu/gradschool_theses/177
