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Abstract
The effectiveness of hedging volatile input prices for biodiesel producers is
examined over one- to eight-week time horizons. Results reveal that hedging
break-even soybean costs with soybean oil futures offers significant reductions
in input price risk. The degree of risk reduction is dependent upon type of hedge,
naïve or risk-minimizing, and upon time horizon. In contrast, cross-hedging
break-even poultry fat costs with soybean oil futures failed to reduce input price
risk.