Cross-Hedging Distillers Dried Grains Using Corn and Soybean Meal Futures Contracts

Ethanol mandates have led to an increase in the production of distillers dried grains (DDGs), a co-product of ethanol production that is incorporated into livestock rations. As with most competitive industries, there is some level of price risk in handling DDGs, and there is no DDG futures contract available for managing price risk. Commonly, DDGs are hedged using only corn futures. Our results suggest that cross-hedge risk may be reduced by including soybean meal futures in an encompassing cross-hedge strategy. Further, we also conclude soybean meal futures currently may be slightly more effective at reducing risk than in the past.


Issue Date:
2009
Publication Type:
Journal Article
DOI and Other Identifiers:
0738-8950 (Other)
PURL Identifier:
http://purl.umn.edu/90654
Published in:
Journal of Agribusiness, Volume 27, Number 1-2
Page range:
1-15
Total Pages:
15




 Record created 2017-04-01, last modified 2017-08-22

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