Hedging Pork Products Using Live Hog Futures: A Feasibility Analysis

Abstract

<p>The increased volatility of commodity market prices in the 1970's and early 1980^s has sharply increased the risks associated with commodity procurement and inventory management in most food processing and distribution firms. Many firms dealing in commodities which have futures markets can use the futures markets as procurement or inventory management tools, but many commodities have no viable futures market. For example, most wholesale meat products (with the exception of pork bellies, boneless beef, and iced broilers) are traded only on cash markets, so hedging pork loins, hams, and most other beef and pork products cannot be done in a directly comparable futures market...</p>