Explain what hedging is in regards to agricultural commodities.
Explain what hedging is in regards to agricultural commodities.
Homework Answers
Suppose, you are a producer of cotton. You expect to deliver/sell 10000 pound of cotton into market after 3 month. Current market price is $0.70/pound. You are afraid that price may fall after 3 month. So, to nullify the price risk you should hedge your position.
So, you have make short in future market. Say, after 3 month price of cotton becomes $.60/cotton. So, in spot market you made loss of $0.10/pound but in future market you will make $0.10/pound and your risk will get nullified.
This is how hedging in agricultural market happens.
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no info given 8. Traditional agricultural export commodities from the Caribbean are marketed in other third world co...
no info given
8. Traditional agricultural export commodities from the Caribbean are marketed in other third world countries b. are sold under the World Trade Organization c. are marketed using international commodity agreements d. none of the above Which one below is important in understanding conduct in agricultural markets? a. producers do not maximize long run profits b. the demand for most agricultural products is elastic c. high barriers to entry exist in farming d. their small size makes farmers...
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9. Hedging strategy to protect against falling prices Price fluctuations in commodities can have significant consequences...
9. Hedging strategy to protect against falling prices Price fluctuations in commodities can have significant consequences for companies, especially if the fluctuation involves a prime raw material for a company. Different companies will adopt different strategies to manage the risk in price fluctuations, indluding adjusting the timing of their commodity purchases, maintaining a safety stock of their raw materials, and hedging Consider the case of Cranked Coffee Company, a large copper-producing company The company's cost of producing copper is about...
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no info given
8. Traditional agricultural export commodities from the Caribbean are marketed in other third world countries b. are sold under the World Trade Organization c. are marketed using international commodity agreements d. none of the above Which one below is important in understanding conduct in agricultural markets? a. producers do not maximize long run profits b. the demand for most agricultural products is elastic c. high barriers to entry exist in farming d. their small size makes farmers...
What features or characteristics of these primary commodities led to the differences in the trends of the relative prices of each of the following products in panels (a), (b), and (c)? Why do some primary commodities show decline, increase, and no trend over time? 2. 55 Chapter 2 | Trade and Technology: The Ricardian Model FIGURE 2-12 (a) Relative Price of Primary Products (decreasing over time) Terms of 1600 1400 1200 1000 800 600 400 200 trade Rubber Wool Aluminum...
9. Hedging strategy to protect against falling prices Price fluctuations in commodities can have significant consequences for companies, especially if the fluctuation involves a prime raw material for a company. Different companies will adopt different strategies to manage the risk in price fluctuations, indluding adjusting the timing of their commodity purchases, maintaining a safety stock of their raw materials, and hedging Consider the case of Cranked Coffee Company, a large copper-producing company The company's cost of producing copper is about...
Discuss what export subsidies and agricultural subsidies are. And explain how they affect trade in agriculture in US and EU
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