Optimal hedging strategies for early-planted soybeans in the South
Sayle, James Hughes
Agricultural producers are exposed to various types of risk in production agriculture. Price risk is one type of risk that producers need to manage. A well established method for managing price risk is the use of futures contracts. Soybean production in the south has evolved over recent years due to changes in technology. The change in production practices due to technology has created agronomic benefits as well as new possible marketing strategies. The agronomic benefits are reflected in both higher and less variable yields. This reduction in production risk may contribute to changes in optimal marketing strategies compared to traditional production systems. New marketing strategies may now be feasible due to earlier harvesting opportunities allowing for new marketing strategies which may be preferable to traditional strategies. The focus of this study will be estimating utility maximizing hedge ratios to capture the impact of production risk on the optimal hedging strategy.