The Cost of Post-Harvest Forward Contracting in Corn and Soybeans

Mindy L. Mallory, Wenjiao Zhao, Scott H. Irwin

Research output: Contribution to journalArticlepeer-review

Abstract

This study estimates the cost of forward contracting corn and soybeans for January and March delivery from 1980 through 2009. Both corn and soybeans exhibited a downward trend in the cost of forward contracting for January delivery, in contrast to previous pre-harvest results, and the March delivery cost of forward contracting is slightly downward sloped. The cost of post-harvest forward contracting corn and soybeans averaged 2 cents and 6 cents respectively; this was much less than the cost of pre-harvest forward contracting in recent years. We did not find an increase in cost associated with income shifting associated with January delivery. We conclude that January forward contracts offer a relatively inexpensive means of smoothing income across years.

Original languageEnglish (US)
Pages (from-to)47-62
Number of pages16
JournalAgribusiness
Volume31
Issue number1
DOIs
StatePublished - Dec 1 2015

Keywords

  • Cash flow risk
  • Corn
  • Cost
  • Counterparty risk
  • Forward contract
  • Income
  • Post harvest
  • Soybeans

ASJC Scopus subject areas

  • Food Science
  • Geography, Planning and Development
  • Animal Science and Zoology
  • Agronomy and Crop Science
  • Economics and Econometrics

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