Extension
Date of this Version
1984
Abstract
This NebGuide discusses how to estimate when it might be profitable to deliver on a hog futures contract and outlines delivery costs and procedures.
Although most hedgers do not actually make delivery on a live hog futures contract, it is the threat of delivery that makes hedging an effective market risk reduction technique. Normally, to fulfill the futures obligation, a producer buys an offsetting futures contract rather than making delivery.
Actual delivery on a futures contract should occur only when the basis during contract maturity is wider than anticipated -- and greater than the delivery costs.
Comments
© 1984, The Board of Regents of the University of Nebraska on behalf of the University of Nebraska–Lincoln Extension. All rights reserved.