Abstract
Recently developed ethanol futures contracts now allow direct-hedging by ethanol producers. This study examines the effectiveness of one- through eight-week hedges between 2005 and 2008. Our findings show (a) ethanol inventory hedging effectiveness is significant for two-week and longer hedges, and increases with the hedging horizon; (b) ethanol futures are significantly superior to gasoline futures for hedging ethanol. price risk for two-week and longer hedges; (c) the corn crushing hedge, utilizing corn and ethanol futures, is effective and provides price risk management capabilities comparable to those provided by the soybean crush hedge.
Original language | English (US) |
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Pages (from-to) | 154-171 |
Number of pages | 18 |
Journal | Journal of Agricultural and Resource Economics |
Volume | 34 |
Issue number | 1 |
State | Published - Apr 2009 |
Keywords
- Corn crushing
- Cross-hedging
- Ethanol futures
- Hedging
- Processing hedge
ASJC Scopus subject areas
- Animal Science and Zoology
- Agronomy and Crop Science
- Economics and Econometrics