The Shape of the Optimal Hedge Ratio: Modeling Joint Spot-Futures Prices using an Empirical Copula-GARCH Model

Commodity cash and futures prices have been rising steadily since 2006. As evidenced by the April 2008 Commodity Futures Trading Commission Agricultural Forum, there is much concern among traditional futures and options market participants that the usefulness of commodity derivatives has been compromised. When basis risk is particularly high, dynamic hedging methods may be helpful despite their complexity and higher transaction costs. To assess the potential benefits of dynamic hedging in volatile times, this paper proposes a novel, empirical copula-based method to estimate GARCH models and to compute time-varying hedge ratios. This approach allows a nonlinear, asymmetric dependence structure between cash and futures prices. The paper addresses four principal questions: (1) Does the empirical copula-GARCH method overcome traditional limitations of dynamic hedging methods? (2) How does the empirical copula- GARCH hedging approach perform, for storable agricultural commodities, compared with traditional GARCH and Minimum Variance (static) hedging methods? (3) Is dynamic hedging more or less effective in the post-2006 biofuels expansion time period? (4) How sensitive is the ranking of methods to the hedging effectiveness criterion used? Preliminary findings suggest that the empirical copula-GARCH approach leads to superior hedging effectiveness based on some, but not all, risk criteria.Agricultural Finance,

Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments

Government farm support programs such as Loan Deficiency Payments (LDP) and Counter-Cyclical Payments (CCP) have payoff structures that effectively make them costless price insurance instruments. A combination of these payments with yield insurance may provide a viable alternative to revenue insurance. This paper finds that, contrary to expectations, the revenue product analyzed is uniformly superior to yield insurance under both current (2002) and proposed (2008) Farm Bill structures of government payments. Given minor adjustments, however, yield insurance combined with government payments can provide more effective risk management than revenue insurance in production areas with low yield–price correlation.copulas, crop insurance, farm bill, government payments, Agribusiness, Agricultural and Food Policy, Crop Production/Industries, Q14, Q18,

The Impact of the Average Crop Revenue Election (ACRE) Program on the Effectiveness of Crop Insurance

This paper analyzes the effect of the ACRE program adopted in the final version of the 2007 Farm Bill on the risk-reducing effectiveness of insurance products. To the best of our knowledge this is a first attempt to analyze the effect of the ACRE program on the risk management decisions of crop producers. In particular, we compare the risk-reducing effectiveness of the two most common insurance contracts — APH and CRC — under the provisions of the 2002 Farm Bill and under ACRE program for representative cotton producer in Texas and corn producer in Illinois. These particular crop/region combinations are selected so as to represent situations of low and high price-yield correlations, respectively.Crop insurance, Farm Bill, ACRE, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Crop Production/Industries, Risk and Uncertainty,

Magnetization profile for impurities in graphene nanoribbons

The magnetic properties of graphene-related materials and in particular the spin-polarised edge states predicted for pristine graphene nanoribbons (GNRs) with certain edge geometries have received much attention recently due to a range of possible technological applications. However, the magnetic properties of pristine GNRs are not predicted to be particularly robust in the presence of edge disorder. In this work, we examine the magnetic properties of GNRs doped with transition-metal atoms using a combination of mean-field Hubbard and Density Functional Theory techniques. The effect of impurity location on the magnetic moment of such dopants in GNRs is investigated for the two principal GNR edge geometries - armchair and zigzag. Moment profiles are calculated across the width of the ribbon for both substitutional and adsorbed impurities and regular features are observed for zigzag-edged GNRs in particular. Unlike the case of edge-state induced magnetisation, the moments of magnetic impurities embedded in GNRs are found to be particularly stable in the presence of edge disorder. Our results suggest that the magnetic properties of transition-metal doped GNRs are far more robust than those with moments arising intrinsically due to edge geometry.Comment: submitte

Water calcium concentration modifies whole-body calcium uptake in sea bream larvae during short-term adaptation to altered salinities

Whole-body calcium uptake was studied in gilthead sea bream larvae (9–83·mg) in response to changing environmental salinity and [Ca2+]. Calcium uptake increased with increased fish size and salinity. Fish exposed to calcium-enriched, diluted seawater showed increased calcium uptake compared with fish in diluted seawater alone. Calcium uptake was unchanged in Na+- enriched, diluted seawater. Overall, [Ca2+], and not salinity/osmolarity per se, appears to be the main factor contributing to calcium uptake. By contrast, drinking was reduced by a decrease in salinity/osmolarity but was little affected by external [Ca2+]. Calculations of the maximum contribution from drinking-associated calcium uptake showed that it became almost insignificant (less than 10%) through a strong decrease in drinking rate at low salinities (0–8‰). Diluted seawater enriched in calcium to the concentration present in full-strength seawater (i.e. constant calcium, decreasing salinity) restored intestinal calcium uptake to normal. Extra-intestinal calcium uptake also benefited from calcium addition but to a lesser extent

Impurity segregation in graphene nanoribbons

The electronic properties of low-dimensional materials can be engineered by doping, but in the case of graphene nanoribbons (GNR) the proximity of two symmetry-breaking edges introduces an additional dependence on the location of an impurity across the width of the ribbon. This introduces energetically favorable locations for impurities, leading to a degree of spatial segregation in the impurity concentration. We develop a simple model to calculate the change in energy of a GNR system with an arbitrary impurity as that impurity is moved across the ribbon and validate its findings by comparison with ab initio calculations. Although our results agree with previous works predicting the dominance of edge disorder in GNR, we argue that the distribution of adsorbed impurities across a ribbon may be controllable by external factors, namely an applied electric field. We propose that this control over impurity segregation may allow manipulation and fine-tuning of the magnetic and transport properties of GNRs.Comment: 5 pages, 4 figures, submitte

The phosphorus requirements for silage production on high fertility soils

peer-reviewedThe minimum phosphorus requirement for a mid-season ryegrass was investigated under cutting conditions over a 10-year period at each of three Teagasc sites (Clonroche, Johnstown Castle and Oak Park) in southeast Ireland. Treatments consisted of 0, 20, 30, 40, and 50 kg ha–1 year–1 P applied in autumn. Generally, there were three grass cuts each year and soil samples were taken after the third cut prior to the application of P. Nitrogen and potassium fertiliser was applied to ensure maximum grass yield. There was an emerging treatment effect over time as evidenced by the significance of the treatment × year interaction. The effect of site varied with year reflecting the variability in weather and number of cuts taken at the individual sites. A treatment effect on annual first-cut-silage yield was observed. The largest treatment difference for dry matter (DM) yield of first-cut silage was between the control and the P treated plots (0.32 t/ha). The results show that the draw down of soil-P reserves was adequate to maintain yield for a number of years without additional fertiliser P application. Initial soil tests indicated moderate to high soil test P levels (STP) as measured by the Morgan’s test. Application of P at equivalent to removal rates did not maintain STP. The results suggest that application of a regular small maintenance dressing of P, replacing realistic removals, is the most appropriate fertiliser application strategy.McDonagh/Albatros Fertiliser

Gill transcriptome response to changes in environmental calcium in the green spotted puffer fish

Abstract Background Calcium ion is tightly regulated in body fluids and for euryhaline fish, which are exposed to rapid changes in environmental [Ca2+], homeostasis is especially challenging. The gill is the main organ of active calcium uptake and therefore plays a crucial role in the maintenance of calcium ion homeostasis. To study the molecular basis of the short-term responses to changing calcium availability, the whole gill transcriptome obtained by Super Serial Analysis of Gene Expression (SuperSAGE) of the euryhaline teleost green spotted puffer fish, Tetraodon nigroviridis, exposed to water with altered [Ca2+] was analysed. Results Transfer of T. nigroviridis from 10 ppt water salinity containing 2.9 mM Ca2+ to high (10 mM Ca2+ ) and low (0.01 mM Ca2+) calcium water of similar salinity for 2-12 h resulted in 1,339 differentially expressed SuperSAGE tags (26-bp transcript identifiers) in gills. Of these 869 tags (65%) were mapped to T. nigroviridis cDNAs or genomic DNA and 497 (57%) were assigned to known proteins. Thirteen percent of the genes matched multiple tags indicating alternative RNA transcripts. The main enriched gene ontology groups belong to Ca2+ signaling/homeostasis but also muscle contraction, cytoskeleton, energy production/homeostasis and tissue remodeling. K-means clustering identified co-expressed transcripts with distinct patterns in response to water [Ca2+] and exposure time. Conclusions The generated transcript expression patterns provide a framework of novel water calcium-responsive genes in the gill during the initial response after transfer to different [Ca2+]. This molecular response entails initial perception of alterations, activation of signaling networks and effectors and suggests active remodeling of cytoskeletal proteins during the initial acclimation process. Genes related to energy production and energy homeostasis are also up-regulated, probably reflecting the increased energetic needs of the acclimation response. This study is the first genome-wide transcriptome analysis of fish gills and is an important resource for future research on the short-term mechanisms involved in the gill acclimation responses to environmental Ca2+ changes and osmoregulation.Peer Reviewe

A Spatial Equilibrium Model of the Impact of Bio-Fuels Energy Policy on Grain Transportation Flows

Traffic flows in the U.S. have been affected by the substantial increase and, as of January 2009, decrease in biofuel production and use. This paper considers a framework to study the effect on grain transportation flows of the 2005 Energy Act and subsequent legislation, which mandated higher production levels of biofuels, e.g. ethanol and biodiesels. Future research will incorporate changes due to the recent economic slowdown.ethanol, biodiesel, spatial equilibrium, quadratic programming, Agricultural and Food Policy, Crop Production/Industries, Resource /Energy Economics and Policy,

The Price Shock Transmission during the 2007-2008 Commodity Bull Cycle: A Structural Vector Auto-Regression Approach to the "Chicken-or-Egg" Problem

Commodity and energy prices have exhibited an unprecedented increase between October 2006 and July 2008, only to fall sharply during the last months of 2008. Many explanations have been offered to this phenomenon, including steadily increasing demand from China and India, large mandated increases in ethanol production, droughts in some key agricultural producer countries, production plateaus in some major oil-producing countries, refinery capacity limits, demand pressure from the derivatives market owing to the diversification properties of commodities, etc. Clearly, agricultural input, output, and energy products are closely related economically. In addition to biofuels, the connection points include nitrogen-based solution liquid fertilizers, fossil fuels used in agricultural production, limited acreage available for field crops, etc. While all these price variables are, evidently, closely connected, it is not entirely clear how exogenous price shocks are transmitted through the system, and whether particular commodities drive up the prices of other commodities. The proposed paper attempts to address this "chicken-or-egg" problem by applying the Structural Vector Autoregression (SVAR) framework to the analysis of a wide range of commodity prices. The purpose of this paper is to model and estimate an SVAR model of multiple commodity prices in order to: (i) Investigate the transmission mechanism of the price shocks associated with the commodity boom of 2006-2008 and subsequent bust and identify changes (if any) relative to earlier time periods (e.g. 2004-2006), (ii) Evaluate the possibly asymmetrical relationship between different commodity and energy price variables and (iii) Test hypotheses of causality in a time series definition (Granger and graph-theoretic). The methodology consists of defining and estimating a structural VAR model, studying impulse response functions and the variance decomposition, and testing for the direction of causality. Given that a longstanding problem is the sensitivity of the results to identifying assumptions, graph analysis is used here as it is a promising approach to identify the structure of the variance-covariance matrix and therefore overcome the observational equivalence of various reduced-form models implied by different identification approaches. The main contribution of this paper is to provide a tentative answer to the question of how agricultural input, output and energy product prices are related and whether this relationship has changed in recent years.Commodity prices, commodity bull cycle, energy prices, Granger-causality, graph theory, structural VAR., Agribusiness, Agricultural and Food Policy, Agricultural Finance, Demand and Price Analysis, Financial Economics, Research Methods/ Statistical Methods,