CASH ETHANOL CROSS-HEDGING OPPORTUNITIES

Increased use of alternative fuels and low commodity prices have contributed to the recent expansion of the ethanol industry. As with any competitive industry, there exists some level of output price risk in the form of volatility. Yet, no actively traded ethanol futures market exists to transfer output price risk to. This study reports estimated minimum variance cross-hedge ratios between Michigan spot cash ethanol and the New York Mercantile Exchange (NYMEX) unleaded gasoline futures for 1-, 4-, 8-, 16-, and 24-week hedging periods. The research yields two results. First, the appropriate quantity of ethanol to hedge with one 42,000 NYMEX unleaded gasoline futures contract for each respective hedging period is realized. Second, the magnitude of the quantities of ethanol required to implement an effective minimum variance cross-hedge ratio is recognized as a possible deterrent to ethanol buyers and sellers from entering into a cross-hedge.Marketing, Resource /Energy Economics and Policy,

MARKET INTEGRATION: CASE STUDIES OF STRUCTURAL CHANGE

The grain/oilseed industry is undergoing considerable structural change in the form of mergers and the addition of new processing facilities to add value beyond commodity grade. The rapid structural changes in this industry call into question the relevance of previous research conducted in these areas. Focusing on two structural change events in northeast Missouri as case studies provides an incisive glimpse at the larger impact of structural change on the grain/oilseed industry. This study addresses the merger of Archer Daniels Midland and Quincy Grain, and the opening of a producer-owned ethanol plant in northeast Missouri to determine if these structural change events altered pricing patterns and linkages in Missouri grain/oilseed markets, and assess the need for re-specification of conventional economic models for price analysis in cases of potential structural change. This research utilizes a three-tier statistical analysis of cointegration tests, Flexible Least Squares analysis, and impulse response functions derived from Vector Autoregressive modeling to investigate the Law of One Price and price relationships among four Missouri grain/oilseed markets. The results are consistent with the Law of One Price, supporting the ideology that markets work, and implying that localized structural change may not significantly affect research shelf-life.Ethanol, Consolidation, Structural Change, Industrial Organization,

Commercial Grain Merchandisers: What Do They Need to Know?

Little information exists on grain merchandisers, their characteristics, and the skills needed to be successful. This research contributes toward filling this gap. A summary of survey responses from 230 experienced grain merchandisers quantifies personal characteristics, skills perceived as important, and desire for executive education. Parametric analyses identify factors contributing to merchandisers’ salaries and their interest in establishing a certification process. Interestingly, experience but not formal education significantly enhances salaries.grain merchandiser, marketing, (executive) education, certification, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Consumer/Household Economics, Crop Production/Industries, Teaching/Communication/Extension/Profession,

On Engineering Support for Business Process Modelling and Redesign

Currently, there is an enormous (research) interest in business process redesign (BPR). Several management-oriented approaches have been proposed showing how to make BPR work. However, detailed descriptions of empirical experience are few. Consistent engineering methodologies to aid and guide a BPR-practitioner are currently emerging. Often, these methodologies are claimed to be developed for business process modelling, but stem directly from information system design cultures. We consider an engineering methodology for BPR to consist of modelling concepts, their representation, computerized tools and methods, and pragmatic skills and guidelines for off-line modelling, communicating, analyzing, (re)designing\ud business processes. The modelling concepts form the architectural basis of such an engineering methodology. Therefore, the choice, understanding and precise definition of these concepts determine the productivity and effectiveness of modelling tasks within a BPR project. The\ud current paper contributes to engineering support for BPR. We work out general issues that play a role in the development of engineering support for BPR. Furthermore, we introduce an architectural framework for business process modelling and redesign. This framework consists of a coherent set of modelling concepts and techniques on how to use them. The framework enables the modelling of both the structural and dynamic characteristics of business processes. We illustrate its applicability by modelling a case from service industry. Moreover, the architectural framework supports abstraction and refinement techniques. The use of these techniques for a BPR trajectory are discussed

Consumers’ Willingness-to-Pay for Retail Branded Beef Products with Bundled Attributes

With a declining share of the domestic meat market, some beef producers are becoming more attentive to opportunities for value-added products tailored to the desires of certain consumer segments. Using a survey of St. Louis and Kansas City, Missouri meat consumers, this study investigates perceptions of and willingness-to-pay for various value-added attributes that could be supplied as retail branded beef products. Factor analysis identifies two alternative attribute bundles as branding strategies based on perceived importance and complementarity of attributes. Nonparametric procedures provide conservative estimates of willingness-to-pay. Parametric methods identify types of consumers willing to pay significantly higher premiums.beef, branding, marketing, value-added, willingness-to-pay, Agribusiness, Marketing, Q13, Q15,

Market Integration: Case Studies of Structural Change

The grain/oilseed industry is undergoing considerable structural change through mergers and new value-added businesses, which raises price-related questions. We analyze the level of price integration prior to and following a merger between two grain firms and the start-up of a producer-owned ethanol facility. This research utilizes error correction vector autoregression analysis to compute market integration structural change effects. We find evidence that market integration initially increases with the merger, but deteriorates with time following the merger. We find no significant localized change in the level of price integration for the case of a new value-added business.consolidation, structural change, price integration, Agribusiness, Industrial Organization,

Cross-Hedging Distillers Dried Grains Using Corn and Soybean Meal Futures Contracts

Ethanol mandates have led to an increase in the production of distillers dried grains (DDGs), a co-product of ethanol production that is incorporated into livestock rations. As with most competitive industries, there is some level of price risk in handling DDGs, and there is no DDG futures contract available for managing price risk. Commonly, DDGs are hedged using only corn futures. Our results suggest that cross-hedge risk may be reduced by including soybean meal futures in an encompassing cross-hedge strategy. Further, we also conclude soybean meal futures currently may be slightly more effective at reducing risk than in the past.cross-hedge, distillers dried grains, ethanol, price risk, Agribusiness, Demand and Price Analysis,

Cash Ethanol Cross-Hedging Opportunities

This draft is dated April 2002.Increased use of alternative fuels and low commodity prices have contributed to the recent expansion of the US ethanol industry. As with any competitive industry, there exists some level of output price risk in the form of volatility. Yet, no actively traded ethanol futures market exists to mitigate output price risk. This study reports estimated minimum variance cross-hedge ratios between Detroit spot cash ethanol and the New York Mercantile Exchange (NYMEX) unleaded gasoline futures for 1-, 4-, 8-, 12-, 16-, 20-, 24-, and 28-week hedge horizons. The research suggests that a one-to-one cross-hedge ratio is not appropriate for some horizons

Cow-Calf Producer Interest in Retained Ownership

The beef industry’s share of domestic meat demand continues to decline, as increasing vertical coordination in pork and poultry contribute to these industries’ ability to offer convenient, consistent, and less expensive products. For such vertical coordination to be effective, incentives must be properly aligned so that those responsible for making the most important investments for system profitability are appropriately compensated. This study demonstrates that cow-calf producers who invest in quality registered cattle and those who are interested in incorporating feedlot and carcass data into herd management decisions are also more interested in retained ownership.beef cattle, property rights theory, retained ownership, Livestock Production/Industries, Marketing, Q13,