@article{Brorsen:285592,
      recid = {285592},
      author = {Brorsen, B. Wade and Coombs, John},
      title = {The Cost of Forward Contracting Wheat},
      address = {1993-04},
      series = {NCCC-134 Applied Commodity Price Analysis, Forecasting,  and Market Risk Management},
      year = {1993},
      abstract = {One of the basic principles of economics is that there is  no such thing as a free lunch. In regard to forward  contracting, we might expect the same. A farmer who forward  contracts wheat is receiving a service. The farmer is  protected from price risk. The grain company takes care of  paperwork, default risk, futures commission, margin calls,  and basis risk. However, the grain company also benefits  because the grain company has a known source of grain at a  known price. Thus, economic theory cannot say for certain  that a farmer who always forward contracts will, on  average, receive less than a farmer who always sells at  harvest. Barkley and Schroeder derive a theoretical model  of forward  contracting with live cattle and argue that who  pays the cost of forward contracting is an question.  Therefore, this paper reports a study of Gulf forward basis  bids for hard red winter wheat which sought to determine  what on average a farmer is paying for the service of  forward contracting.},
      url = {http://ageconsearch.umn.edu/record/285592},
      doi = {https://doi.org/10.22004/ag.econ.285592},
}