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Friday, July 24, 2020 | History

3 edition of The use of N.Y. cotton futures contracts to hedge cotton price risk in developing countries found in the catalog.

The use of N.Y. cotton futures contracts to hedge cotton price risk in developing countries

Panayotis N. Varangis

The use of N.Y. cotton futures contracts to hedge cotton price risk in developing countries

by Panayotis N. Varangis

  • 315 Want to read
  • 30 Currently reading

Published by World Bank, International Economics Dept., International Trade Division in Washington, D.C .
Written in English

    Places:
  • Developing countries.
    • Subjects:
    • Cotton -- Prices -- Developing countries.,
    • Cotton trade -- Developing countries.

    • Edition Notes

      Other titlesUse of New York cotton futures contracts to hedge cotton price risk in developing countries
      Statementby Panos Varangis, Elton Thigpen and Sudhakar Satyanarayan.
      SeriesPolicy research working paper ;, 1328, Policy research working papers ;, 1328.
      ContributionsThigpen, Elton., Satyanarayan, Sudhakar.
      Classifications
      LC ClassificationsHG3881.5.W57 P63 no. 1328
      The Physical Object
      Pagination28 p. :
      Number of Pages28
      ID Numbers
      Open LibraryOL925103M
      LC Control Number95224059
      OCLC/WorldCa31038764

        If the price of soybeans shoots up to say $13 in six months, the farmer will incur a loss of $ (sell price-buy price = $$) on the futures contract. The most popular type of cotton grown in the U.S. is called American Upland which accounts for 97% of all U.S. cotton crop grown every year. Cotton #2 futures contracts are traded on the NYBOT while cotton futures contracts are traded on the NYMEX; both contracts have the same delivery dates. Source: USDA. Last updated May Additional Info.

        Producers and consumers of commodities use futures markets to protect against adverse price moves that could result in large financial losses. A producer of a commodity is at risk of prices moving lower while a consumer of a commodity is at risk of prices moving higher. A producer, with downside risk (i.e. prices will fall) could use Sell Futures Contracts to lock in a price, in which case it would be referred to as a ‘short futures hedge’. Alternatively, a merchant could offer a Call-Pool Contract to a producer, and the producer decides when futures (sell), currency and basis are locked-in (as outlined.

      Futures Option prices for Cotton #2 with option quotes and option chains. This investment alignment allows the investor to hedge against risk due to the offsetting nature of the securities. Strike: The price at which the contract can be exercised. Strike prices are fixed in the contract. Free intra-day Cotton #2 Futures Prices / Cotton #2 Quotes. Commodity futures prices / quotes and market snapshots that are updated continuously during trading hours.


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The use of N.Y. cotton futures contracts to hedge cotton price risk in developing countries by Panayotis N. Varangis Download PDF EPUB FB2

The use of New York cotton futures contracts to hedge cotton price risk in developing countries (English) Abstract Cotton exports account for a significant share of commodity exports for some developing countries, especially in West Africa and Central by: 7. Use of New York cotton futures contracts to hedge cotton price risk in developing countries Responsibility: by Panos Varangis, Elton Thigpen and Sudhakar Satyanarayan.

Cotton-producing developing countries and economies in transition make little use of hedging mechanisms to reduce risk from the volatility of cotton export revenues. Countries in Francophone West Africa use forward sales to hedge but only for a small share of the crop. Cotton producers can hedge against falling cotton price by taking up a position in the cotton futures market.

Cotton producers can employ what is known as a short hedge to lock in a future selling price for an ongoing production of cotton that is only ready for sale sometime in the future.

cotton futures contracts to hedge cotton price risk in developing countries. The paper concentrates on five countries/regions. They are: Uzbekistan, Pakistan, China, Turkey and the FPA. These countries/regions were chosen because they account for about 60% of cotton production and 40% of cotton exports from developing countries, and, with the exception of China, cotton exports account.

Presently, cotton producers in developing countries such as the African Franc Zone countries make very li- mited use of risk management instruments to hedge their exposure. Commodity cash prices are more variable than futures prices. Futures and options may provide the most efficient way to deal with short-term price uncertainty (Varangis.

et al. price risk within the existing cotton marketing system in FPA countries and the implications following market liberalization. The paper also quantifies the cotton price risk and investigates the appropriateness of using N.Y.

cotton futures contracts to hedge FPA cotton price risk. In particular, simulations using the N.Y. The term "basis" is used to describe the difference between the price of the commodity in the actual market and the price of the futures contract in the same commodity.

You can hedge this risk with cotton futures. You place a short hedge by selling cotton futures. Expected price is $ Buy N.Y. futures at $ May 1: Buy cotton.

Chapter 3 Hedging with Futures Contracts Inthischapterweinvestigatehowfuturescontractscanbeusedtoreducetheriskas-sociatedwithagivenmarketcommitment.

Use of futures contracts to hedge a forecasted transaction—cash flow hedge. As of January, our company plans to purchaselbs. of copper on May 31 at the prevailing spot rate. To hedge this forecasted transaction, we purchase May futures contracts in January forlbs.

of copper at the futures price of $/lb. What the futures hedge does do is reduce risk by making the outcome more certain. There are a number of reasons why hedging using futures contracts works less than perfectly in practice. The asset whose price is to be hedged may not be exactly the same as the asset underlying the futures contract.

risk. New York Board of Trade Cotton Futures Futures contracts enable the purchase or sale of a commodity at a fixed price in a particular month in the future.

For exam-ple, consider a California cotton grower. On March 1,this grower could have gone to the New York Board of Trade (NYBOT) and entered a futures contract to sell cotton in.

With each NYMEX Cotton futures contract covering pounds of cotton, the textile mill will be required to go long futures contracts to implement the hedge.

The effect of putting in place the hedge should guarantee that the textile mill will be able to purchase the million pounds of cotton at USD /lb for a total amount of USD 2, The merchant holds the contracts as a hedge until the cotton is sold fixed price, at which time the futures contracts will be liquidated.

If the hedger maintains the practice of completely hedging its cotton position the market position is said to be even, in other words not long or short.

leaves a significant part of price risk unhedged. The use of cotton futures/options contracts can supplement forward sales in order to achieve a more desirable level of hedging. In addition, futures contract can add to the flexibility of the selling decisions. The recent liberalization efforts in.

The use of N.Y. cotton futures contracts to hedge cotton price risk in developing countries / by Panos V French Equatorial Africa; Fertility of soils: a future for farming in the west African savannah / Christian J.M.G.

Pieri ; [trans French-speaking West Africa: from colonial status to independence. A corn farmer who wishes to hedges her crop will initially _____ corn futures contracts, then buy those contracts back later and sell corn in the futures market.

Spot The ________ price refers to the price at a market where exchange takes place immediately, at the present time. Factors Affecting Hedging Decisions Using Evidence from the Cotton Industry Practitioner’s Abstract Few farmers utilize futures and options markets to price their crops despite significant educational efforts.

This study seeks to analyze producer hedging behavior within the framework of the overall marketing behavior. However, these price swings are a double-edged sword and Cotton futures trading is accompanied by several risks affecting the underlying commodities, such as: Changes in Government Policies: In the United States, which is a large producer of cotton, the cotton industry has been heavily subsidized by the government since the s.

Having the ability to take advantage of futures market contracts and options contracts as a means of shifting price risk is a valuable tool for producers. While trading futures market contracts and options contracts may be a relatively easy task to undertake, understanding the fundamental concept behind how these contracts are used from a price.

Bangladesh should practise hedging for cotton imports, as the consumption of the fibre is on the rise and so are the trading risks, said industry g is a strategy designed to reduce.Study 54 Chapter Understanding and Applying Hedging Using Futures, Options, and Basis flashcards from ksh 4. on StudyBlue.

Chapter Understanding and Applying Hedging Using Futures, Options, and Basis - Agricultural Economics with Moore at University of Missouri- Columbia - .options on futures are used by both the domestic and global cotton industries to price and hedge transactions.

Just as cotton is important to developing industry, it is also important Options trading volume on the Cotton No.

2 futures contract has grown .