Agricultural Economics Department

 

Date of this Version

5-19-2021

Citation

Cornhusker Economics, May 19, 2021

https://agecon.unl.edu/cornhuskereconomics

Comments

Copyright 2021 University of Nebraska.

Abstract

Commodity markets go through periods with low volatility when we generally see small variations in prices, as well as periods with high volatility, when we tend to see large swings in prices. Regardless of the degree of price volatility in the market, producers can always use marketing contracts as a way to hedge the price risk of their operation. Even though the general mechanics of hedging are the same in periods of low volatility and high volatility, some aspects of hedging become more evident in times of high volatility. In this article, we will discuss some of these aspects focusing on hedging with futures contracts.

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