Vol. 2 No. 3 (2013): Between Crisis and Development: Which Role for the Bio-Economy
Full Research Articles

Commodity futures markets: are they an effective price risk management tool for the European wheat supply chain?

Marco Zuppiroli
Università degli Studi di Parma

Published 2013-10-26

Keywords

  • futures markets,
  • wheat,
  • hedging,
  • commodity prices

How to Cite

Revoredo-Giha, C., & Zuppiroli, M. (2013). Commodity futures markets: are they an effective price risk management tool for the European wheat supply chain?. Bio-Based and Applied Economics, 2(3), 237–255. https://doi.org/10.13128/BAE-12952

Abstract

The instability of commodity prices and the hypothesis that speculative behaviour was one of its causes has brought renewed interest in futures markets. The paper analyses the European wheat futures markets (feed and milling) and the Chicago Board of Trade’s wheat contract as a comparison. Although the main purpose of the paper is to analyse whether futures markets are still useful for hedging (considering the demands from different market participants), implicitly this can be seen as testing whether the increasing presence of speculation has made futures markets divorced from physical markets. The results indicate that hedging with futures markets is still a viable alternative for dealing with price risk. This is particularly true in short period hedges (e.g. merchants and processors), where the basis seems to have been affected by the observed price instability.