Date of this Version
Cornhusker Economics (January 13, 2023)
Agricultural economics, University of Nebraska-Lincoln
In this article, we connect what the industry says and what producers say to improve the disconnect and the decision-making environment associated with hedging. We accomplish this by inspecting the distribution of producer prices with and without hedging in the fall as the distribution contains both yearly outcomes (producer concern) as well as the average outcome (another point of view). Computer models are used to lift the mystery surrounding the role of hedging. Computer models help understand complex processes, allowing for a better decision environment, leading to improved financial standing and stability. Our model reproduces the risk profile that individual farmers experience. We accomplish this through a holistic view where we inspect hedging performance through the lens of a larger context - the evolution of prices before prices are observed. We are thinking of the 2023 crop year.