IMPACT OF CASH SETTLEMENT ON FEEDER CATTLE BASIS

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.


Subject(s):
Issue Date:
1991-07
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/32624
Published in:
Western Journal of Agricultural Economics, Volume 16, Number 1
Page range:
93-105
Total Pages:
13




 Record created 2017-04-01, last modified 2017-08-25

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