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

Abstract

<p>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.</p>