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Meat producers such as Smithfield Foods (SFD +0.3%), Tyson (TSN -0.3%), and Pilgrim's Pride (PPC...

Meat producers such as Smithfield Foods (SFD +0.3%), Tyson (TSN -0.3%), and Pilgrim's Pride (PPC -5.5%) are on watch to see how well their hedges worked over the last month to protect against higher prices for corn and soybean meal. Push finally comes to shove for the industry after it promised to deliver better returns than it did during 2008 and 2009 when hedges flopped and companies saw wide losses on fluctuating prices. For better or worse, things will be simpler for Sanderson Farms (SAFM -0.8%) with its policy of forsaking hedging to buy feed at spot-market prices.
Comments (1)
  • yes, that would be interesting to see whether hedging works.

     

    low cost airlines such as Jetblue & Southwest make money because they hedge close to 40% of their jet fuel exposure.

     

    Goodyear & other tire manufacturers DO NOT HEDGE because they think they can talk down the market in Singapore becoz of special privileges extended to tire manufacturers to set up shop in Singapore.

     

    now GT is going around banking circles in Singapore Hat in Hand and Winged Foot cannot get funding for working capital from any of the Singapore-based foreign banks.

     

    Winged Foot already maxed out their loans from local Singapore banks such as DBS, OCBC & UOB

     

    in general, through a combo of futures & options (with the CFO keeping a tight leash on Variable @ Risk), hedging works.

     

    CNBC's Kate Kelly mentioned in an article in May 2012 that when Crude tanked from $145 July 2008 to $30 by March 2009; Southwest made a US$1 billion in hedging profits!
    11 Jul 2012, 03:56 PM Reply Like
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