future commodities trading

{This|This kind of} paper addresses issues {affecting|influencing|impacting} mature and developing {markets|marketplaces|market segments} by studying the {hedging|hedge} characteristics of the two {most important|most significant|most crucial} commodities at the food-fuel intersection. Rather than examine the linkages between these commodities we {rely|count} on {the evidence|evidence} that the commodities are distinct2 and draw from this that the two commodities must be separately hedged {in the short term|for the short term|for a while}. The study examines the period between 2017 and 2018, {including the|such as the|like the} summers of 2017 and 2018 when markets were particularly {turbulent|violent|thrashing} for different reasons. 3 Important {variations|distinctions|dissimilarities} between regularly cited data sets for spot ethanol prices are identified; we {clarify|describe|make clear} these {variations|distinctions|dissimilarities} in {conditions} of data collection methodology and demonstrate the substantial {effect of|a result of} these {variations|distinctions|dissimilarities} on {empirical|scientific} results. Optimal futures hedge ratios and hedge {effectiveness|performance|efficiency} for the spot/futures pairs of corn and ethanol are investigated {utilizing a|by using a} variety of models, hedge {horizons|course|rayon} and out-of-sample periods. {All|Almost all|Most} hedge strategies are {tested|examined|analyzed} for effectiveness using both a variance reduction metric and a value-at-risk {reduction|decrease|lowering} metric. Anomolous hedge performance in the latter part {of our|of the|of your} sample period is {recognized|determined|discovered} and evaluated, and this effect is {explained|described|discussed} in {conditions} of weather-related inventory shocks and (to a lesser extent) biases in estimating optimal {futures|futures and options|options contracts} hedge ratios.