Multi-commodity price risk hedging in the Atlantic salmon farming industry
Peer reviewed, Journal article
Published version
Åpne
Permanent lenke
https://hdl.handle.net/11250/2735989Utgivelsesdato
2021Metadata
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- Institutt for kjemi [1402]
- Institutt for materialteknologi [2555]
- Institutt for vareproduksjon og byggteknikk [1073]
- Publikasjoner fra CRIStin - NTNU [38576]
Originalversjon
https://doi.org/10.1016/j.jcomm.2021.100182Sammendrag
Cost management has received limited attention in the aquaculture industry due to historically high profit margins. This trend, however, is not likely to continue. This creates a need for knowledge on optimally managing financial risks. In this study, we address the joint input-output price hedging problem of salmon farmers. Along with salmon, we consider three essential commodities used in fish feed mixtures. We use state-of-the-art copula models to examine multi-commodity hedging strategies. Our results show significant potential in reducing the joint price risk. Our key finding is that multi-commodity hedging improves hedging effectiveness for short horizons and risk-return trade-off for longer horizons. Salmon farmers face a trade-off where longer hedging horizons yield increased effectiveness and lower costs, yet require increased pre-planning of slaughtering volumes.