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Abstract

We investigate the potential to develop hedging strategies for firms in the U.S. microbrewing sector. We test for statistical relationships between cash prices for hops and barley, and futures prices for two classes of wheat and corn to determine whether price relationships are such that cross-hedging hops and barley with existing futures contracts appears feasible. We test for stationarity in prices, and for co-integration relationships between the brewers’ inputs and commodity futures prices. We then use regression analysis to calculate hedge ratios for brewer inputs. Results indicate cross-hedging opportunities for small breweries may exist.

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