Risk Management Strategies

Wagner, Robert, M.S., Department of Agribusiness and Applied Economics, College of Agriculture, North Dakota State University, April 2001. Risk Management Strategies for Grain Traders and Processors. Major Professor: Dr. William W. Wilson. This study reviewed the theory and current techniques of risk management for firms operating in the agribusiness industry. Various motivations and tools of hedging were examined along with statistical techniques for determining optimal hedge ratios. A new theoretical approach was developed explicitly modeling the operations of a firm, including both procurement and marketing functions. The concept of strategic demand for hedging was developed in the context of an analytical model, representing the adjustment in hedge ratios in relation to the hedge horizon and input-output price correlations. Three business cases were developed for illustrating and evaluating the theoretical model. Suggestions for additional research were offered.