Cross-Hedging Fishmeal: Exploring Corn and Soybean Meal Futures Contracts

Abstract

During 2006 the fishmeal price nearly doubled from $500MT to over$900MT. The objective of this research is to determine the optimal cross-hedge ratio between fishmeal and soybean meal and corn, and corresponding hedging weight between corn and soybean. Results indicate all hedging weight should be placed on the corn futures contract. This is an interesting result since prior fishmeal cross-hedging research has not analyzed the corn futures contract as a risk management mechanism.Crop Production/Industries, Risk and Uncertainty,