Browsing by Author "Bainbridge, Bruce B."

Now showing 1 - 5 of 5
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    Comparative analysis of cash margin hedging strategies with commodity futures contracts and options
    Rowsell, John (Virginia Tech, 1987-03-05)
    The performance of futures contracts and commodity options as hedging instruments were compared in a cash margin hedging framework for a 150 sow farrow to finish hog operation in southeastern Virginia. The expected cash margin (ECM) using corn soybean meal and hog futures were calculated daily from 1975 through 1982. The performance of options and futures were compared in 530 strategies that ranged from strait routine fixed margin hedging to strategies based on forecasted variable margins.
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    Explaining Virginia slaughter cattle basis: an empirical examination of the elements affecting cash price in local Virginia markets
    Botkin, Clayton Jay (Virginia Tech, 1989-06-04)
    This research quantifies specific cash price premiums and discounts associated with various characteristics of slaughter cattle in Virginia. Econometric models of Virginia slaughter cattle basis were developed for each practical combination of sex and market by differentials in weight, grade, breed, lot size, order of sale of a particular lot, number of cattle in a particular sale, and a seasonal indicator based on the Chicago Mercantile Exchange (CME) live cattle futures contract month. Explanatory models were found to account for 41 to 64 percent of the variation in slaughter cattle basis for steers and 35 to 47 percent of the variation in slaughter cattle basis for heifers. Results explain over 30 percent more of basis variation than previous research. These basis estimates reduce basis error and hedging risk and potentially offer Virginia cattlemen the means to initiate effective slaughter cattle hedging programs. Furthermore, the implementation of a forward pricing agency which uses estimated basis values may provide alternatives to facing basis risk when selling slaughter cattle in Virginia. An analysis of basis risk provides some indication of the magnitude of possible exposure facing the average Virginia cattleman when making hedging decisions based on estimation procedures as defined herein. The formation of a forward pricing agency should be contingent upon further analyses of basis risk as outlined in this research. Investigation of basis estimate residuals concluded that more variability is present as time to contract maturity increases. This information should prove valuable for those involved in trading options on live cattle futures as options expire one month prior to their respective futures contracts.
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    Impact of cash settlement on feeder cattle basis
    Kenyon, David E.; Bainbridge, Bruce B.; Ernst, Robin (Western Agricultural Economics Association, 1991-07)
    The feeder cattle futures contract specifications were changed in 1986 from physical delivery to cash settlement. The Chicago Mercantile Exchange expected this change to reduce basis variability and improve the ability of hedgers to predict basis. This study analyzes the basis for individual lots of feeder cattle before and after cash settlement. Basis equations were estimated by breed, sex, weight, grade, and season. These equations were used to predict basis. The results indicate basis variability was not reduced and hedger ability to forecast basis, in general, was not improved significantly under cash settlement compared to physical delivery.
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    Marketing update : hog & pig report, cattle inventory, marketing
    (Virginia Cooperative Extension Service, 1987)
    Discusses reports released by government agencies and their implications on livestock marketing.
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    Virginia feeder cattle basis by season, location, sex, breed, weight and USDA grade differentials
    Ernst, Robin Tracy (Virginia Tech, 1989-01-05)
    Explanatory feeder cattle basis models were developed for 16 different Virginia markets by season, futures contract month, weight, lot size, sex, breed and USDA grade differentials. The models are more disaggregated and explain up to 80 percent more of feeder cattle basis variation than any previous research. Since the variables in these explanatory models are all known in advance, these basis models are also predictive. Basis estimates from these models make it possible for a Virginia feeder cattle forward pricing agency to offer forward price and minimum price contracts to small size operators.