Basis analysis and implications for using futures markets as price risk management tool in the uruguayan soybean production
Present article is aimed to research into the feasibility of using financial instruments as futures and options contracts in some of the existing stock exchanges (Chicago Board of Trade and Mercado a Término de Buenos Aires) to hedge price risk in the case of Uruguayan farmers. Prices on the futures markets and in the Uruguayan spot market show similar trends in their evolution. An efficient hedge requires that the behaviour of the prices in the market where de hedge is done and at the local spot market to be similar on their trend. The difference between these two prices (futures price and spot price) is known as trade basis and is key in the determination of the hedge efficiency. Prices, beyond having a similar trend must have also have relative variation also similar in order to make price risk management efficient since gains in the physical position will compensate the loss in the futures position and vice versa. The standard deviation of the basis is always lower than the standard deviation of the FOB price, what implies that it is feasible to do an efficient hedge. The results for the years 2003-4 to 2006-7 show that the conduct of the basis is highly unstable between years and even within the same year (as a relative value). No significant differences were found between the two markets analized (Chicago Board of Trade and Mercado a Término de Buenos Aires). Even though the time series analyzed is short (few years signed by a significant volatility) an improvement on the efficiency of coverage is observed.
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| Format: | Digital revista |
| Language: | spa |
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Coeditada entre Facultad de Agronomía - Udelar y el Instituto Nacional de Investigación Agropecuaria (INIA)
2008
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| Online Access: | https://agrocienciauruguay.uy/index.php/agrociencia/article/view/750 |
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