Hedging with futures contracts in the Brazilian soybean complex

BM&F vs. CBOT

Bibliographic Data

ID4937593
AuthorsAndréia Regina O Da Silva (Universidade Federal de Viçosa), Danilo Rolim Dias De Aguiar (0000-0001-9791-9774, Universidade Federal de Viçosa), João Eustáquio De Lima (0000-0003-4404-4817, Universidade Federal de Viçosa)
Year2003
Volume41
Issue2
Pages383-405
Publication date2003-06-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueRevista de Economia e Sociologia Rural (JOURNAL)
Journal identifiersISSN: 0103-2003 • E-ISSN: 1806-9479
PublisherFapUNIFESP (SciELO) (PUBLISHER)
DOI10.1590/s0103-20032003000200004
OpenAlexW1999323569
SCIELO_PIDS0103-20032003000200004
LanguageEN
Citations received2
References cited6

This article analyzes the effectiveness of hedging Brazilian soy oil, soy meal, and soybeans in the Chicago Board of Trade (CBOT) and in the Brazilian Commodities and Futures Exchange (BM&F) to reduce the risk of financial loss due to commodity price fluctuations. The econometric results show that a cross-hedging strategy using the BM&F soybean futures contract is an instrument of low effectiveness for managing soy oil and soy meal price risk. Despite low effectiveness, the estimates demonstrate total advantage for soy meal hedging operations using CBOT soy meal futures contracts rather than cross-hedging using BM&F soybean futures contracts. With some exceptions, the results are also more favorable for hedging soy oil with soy oil futures contracts at the CBOT rather than cross hedging with soybeans at the BM&F. Conversely, Brazilian traders hedging soybeans receive more effective risk protection by trading soybean futures contracts at the BM&F than by trading soybean futures contracts at the CBOT

Agribusiness · Agriculture · Business · Economics · Financial economics · Futures contract · Hedge · Olive oil · Soy bean · Soybean meal · Soybean oil · Chemistry · Food Science · Market Dynamics and Volatility

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