Systematic Hog Price Management: Selective Hedging and Long-Term Risk Sharing Packer Contracts

John D. Lawrence; Zhi Wang

Management Economics

Systematic Hog Price Management: Selective Hedging and Long-Term Risk Sharing Packer Contracts

Authors: John D. Lawrence (Iowa State University) , Zhi Wang (Iowa State University)

Abstract

In addition to futures and options markets, long-term risk sharing hog procurement contracts offered by packers provide some degree of price risk protection for pork producers. The window contract and a moving average hedging strategy generated similar average returns and level of profit risk protection. The cost-plus contract provided a greater degree of risk protection from prices below cost of production and used a ledger account to ensure that prices average the same as the cash market over the long run.

Keywords: ASL R1504

How to Cite: Lawrence, J. D. & Wang, Z. (1998) “Systematic Hog Price Management: Selective Hedging and Long-Term Risk Sharing Packer Contracts”, Iowa State University Animal Industry Report. 1(1).