Agricultural Economics and Development

Agricultural Economics and Development

The Role of Agricultural Commodity Exchange on Hedging (Case Study: Selected Agricultural Product)

Authors
A. Amjadi
S. A. Hosseini Yekani
S. Ahmadi Kaliji
10.30490/aead.2017.59073
Abstract
Abstract
Fluctuations in the agricultural products price face producer and consumer with risk and uncertainty. Futures contract as an important tool of hedging pays to price risk management. Base on, this study has tried to use of the least mean-variance method investigating agricultural product hedging situation in the Wall Street exchange market at the one-month period of December 2014. The results show that the futures contract of corn decreasing risk price about 26 percent. Also, in comparison with corn, the futures contract of soybean has more hedging than corn futures contract. The results of hedging efficiency of wheat futures contract represent hedging is up to 83 percent and this amount for cotton is about 79 percent. According to the results, development of agricultural commodity exchange specially the agricultural futures contracts can be minimized farmers concerns in the field of risk.

JEL Classification: D81, G32

Keywords:
Agricultural Commodity Exchange, Hedging, Least Mean-Variance Method