Structural Change in Forward Contracting Costs for Kansas Wheat

Farmers use forward contracts to eliminate adverse price and basis movements prior to harvest. Since late 2007, the local basis for Kansas wheat has changed dramatically relative to historic levels, causing greater risk exposure for elevators offering forward contracts. The result has been an increase in the cost of forward contracting paid by farmers from $0.086 per bushel to $0.327 per bushel. The factors driving this increase in costs are basis volatility, wheat futures harvest price, the information available in the market as harvest approaches, and realized returns to the elevator from forward contracting in previous years.


Issue Date:
2014
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/186584
Published in:
Journal of Agricultural and Resource Economics, Volume 39, Number 2
Page range:
217-229
Total Pages:
13
Series Statement:
Volume 39
2




 Record created 2017-04-01, last modified 2017-04-28

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