The 1996 and 2002 Farm Bill changes in milk support price legislation
deregulated the market and milk prices are more volatile than ever. The use of a
mechanism to reduce farmers' exposure to volatile milk prices has therefore become
essential. This study evaluates the impact of two hedging strategies, one conservative and
the other an intermediate one (more sophisticated). Optimal parameters for the two
strategies are searched over a period of 5 years. Then, the performance, in terms of
increased profitability and reduced variation, is assessed and the best performer is chosen
and applied to an out-of-sample dataset.
With the in-sample data, both strategies generate higher mean monthly profits than
with the no-hedging option. Comparison of both strategies indicates that the intermediate
strategy outperforms the conservative one in terms of higher profitability and lower
variance. Out-of-sample results confirm the findings of the in-sample results. The
additional profits and the reduction in volatility can make the difference between keeping
a farm profitable and bankruptcy. / Master of Science
| Identifer | oai:union.ndltd.org:VTETD/oai:vtechworks.lib.vt.edu:10919/37159 |
| Date | 06 January 2005 |
| Creators | Andino, Alexandra Elizabeth |
| Contributors | Agricultural and Applied Economics, Purcell, Wayne D., Groover, Gordon E., Reaves, Dixie Watts |
| Publisher | Virginia Tech |
| Source Sets | Virginia Tech Theses and Dissertation |
| Detected Language | English |
| Type | Master's project |
| Format | application/pdf |
| Rights | I hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to Virginia Tech or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report. |
| Relation | ETD_Alexandra_Andino_Final.pdf |
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