Ledger Provision in Hog Marketing Contracts
By David A. Hennessy and Donald Lien - Some long-term marketing contracts in the North American hog sector provide for price-dependent loan agreements at low rates. We show that these provisions linking pricing with financing are hybrids between forward rate agreements and commodity options.
30 June 2003
2 minute read
This observation presents approaches for valuing the stipulations.
We suggest that the ledger arrangement is transaction-cost efficient, especially for a packer with a natural partial pass-through hedge from retail market positions.
To read the full report, click here (PDF - 15 pages, 61kb)
Source: Center for Agriculture and Rural Development - Iowa State University - Working Paper 03-WP 336 - June 2003
We suggest that the ledger arrangement is transaction-cost efficient, especially for a packer with a natural partial pass-through hedge from retail market positions.
To read the full report, click here (PDF - 15 pages, 61kb)
Source: Center for Agriculture and Rural Development - Iowa State University - Working Paper 03-WP 336 - June 2003
