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Comparison of selective hedging and options strategies in cattle feedlot risk management
Author(s) -
Schroeder Ted C.,
Hayenga Marvin L.
Publication year - 1988
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.3990080203
Subject(s) - feedlot , fed cattle , profitability index , purchasing , feeder cattle , business , profit (economics) , marketing , cash , profit margin , price risk , agricultural science , economics , finance , microeconomics , futures contract , zoology , environmental science , biology
A cattle feedlot marketing simulation model was developed and used to evaluate the performance of various feedlot marketing strategies. The marketing analysis included corn, feeder cattle, and fed cattle integrated marketing alternatives. A variety of strategies were compared including hedging and put option purchasing as signaled via profit margins or price forecasts. The results indicate that cattle feeders could have historically increased profitability and decreased the variability of profits through selective marketing by using either profit margins or price forecasts to signal market positions as compared to cash marketing strategies. In addition, several strategies were found that stochastically dominated cash marketing.