Hedging Effectiveness of Commodity Futures Contracts to Minimize Price Risk: Empirical Evidence from the Italian Field Crop Sector
Risks
; 9(12):213, 2021.
Article
in English
| ProQuest Central | ID: covidwho-1596904
ABSTRACT
Over the last years, farmers have been increasingly exposed to income risk due to the volatility of the commodities prices. Among others, hedging in futures markets (i.e., financial markets) represents an available strategy for producers to cope with income risks at farm level. To better understand the advantages of such promising tools, this paper aims at analyzing the hedging effectiveness for soybean, corn and milling wheat producers in Italy. Following the literature, three different methodologies (i.e., naïve, OLS, GARCH) are applied for the estimation of the hedge portfolio, then compared to an unhedged portfolio for assessing the income risk reduction. Findings confirm the hedging effectiveness of futures contracts for all the considered commodities, showing also that this effect increases with longer hedge horizons, and also showing better performances for the European exchange market (i.e., Euronext), compared to the North American counterpart.
Insurance; agricultural, commodities; futures, contracts; hedging, effectiveness; hedging, ratio; time, horizon; Hedging; Market, positioning; Futures, market; Common, Agricultural, Policy; Expected, utility; Volatility; Derivatives; Prices; Soybeans; Cereals; Expected, values; COVID-19; United, States--US; Italy
Full text:
Available
Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Experimental Studies
/
Prognostic study
Language:
English
Journal:
Risks
Year:
2021
Document Type:
Article
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