This research quantifies risk reduction and performance of the producer accumulator contract in corn and soybean markets. To quantify performance, we use three alternative theoretical pricing models to estimate historical producer accumulator contract specifications in corn and soybean markets. We then compare the performance of the producer accumulator to eight alternative agricultural marketing strategy portfolios that are also used in new generation grain contracts.
The performance measures we compare are: average bushel price that would be received by the producer, daily portfolio risk, and the Sharpe ratio. The period we examine performance was between 2008 and 2017. We investigate performance of the producer accumulator executed during each year, month, whether the contract was executed during the growing season or non-growing season, and beginning and following an uptrend, neutral trend, and downtrend ranging in length from 25 to 100-days. Specific to the producer accumulator, we also quantify bushels accumulated during the contract period.
We find the average price the producer would expect to receive adopting an accumulator to slightly underperform the average price they would receive with a long futures portfolio in corn and slightly outperform long futures in soybeans. Nevertheless, the accumulator significantly reduces daily risk compared to the long futures portfolio. Indeed, producer accumulator portfolios produced average daily Sharpe ratios exceeding all other simulated risk management strategies in corn and soybeans on an average annual and average aggregate basis from 2008-2017. Consequently, the producer accumulator portfolio offered corn and soybean producers the best risk adjusted return to hedge production during this time-frame.
|Advisor:||Elliott, Lisa, Elliott, Mattew|
|Commitee:||Britson, Victoria, Wang, Zhiguang|
|School:||South Dakota State University|
|School Location:||United States -- South Dakota|
|Source:||MAI 56/06M(E), Masters Abstracts International|
|Subjects:||Agricultural economics, Finance|
|Keywords:||Accumulator, Corn, Grain marketing, Producer, Risk management, Soybeans|
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