STRUCTURE OF THE LIVE OAK, FLORIDA

 HOG BASIS, JANUARY, 1972 OCTOBER, 1980


 James R. Simpson and Ronald W. Ward

 Price movements are a major factor leading to the economic success

 or failure of hog production. Producers not protected against adverse

 price movements must be in a financial position to withstand consider-

 able economic losses. Hog producers, like all livestock and crop pro-

 ducers, face uncertainties in both production and prices. Improvements

 in management and new production technologies can greatly reduce the

 individual's production uncertainties and thus lead to potential increased

 profits. Producers have control over some factors that lead to production

 uncertainties but, in contrast, few producers are of sufficient size to

 have an appreciable influence on their product's price once it enters

 the market channel. Rather, they are price takers and face marketplace

 uncertainties. This circular is aimed at providing information for

 hedging, one popular form of reducing risk from price uncertainty.


 Introduction

 A number of pricing institutions have evolved over time to address

the problem of price risk. Futures trading is one alternative that has

proven useful for producers. Futures contract specifications, geographical

production differences, and industry size are but a few determinants

affecting applicability of a futures market to specific producers. The

trading concept is rather simple and easily implementable, but the use



 JAMES R. SIMPSON is Associate Professor and Extension Livestock
Marketing Economist, and RONALD W. WARD is Professor, in the Food and
Resource Economics Department.