Jason Franken

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Information Transmission between Hog Futures and Expert Price Forecasts

Journal of Agribusiness, 2018

We evaluate the interactions in four markets among expert forecasts, futures prices, and realized... more We evaluate the interactions in four markets among expert forecasts, futures prices, and realized cash hog prices. Vector autoregression findings indicate a dynamic interaction among futures and cash markets, with some past forecasts affecting cash prices. Contemporaneous causal analysis reveals causation of cash prices by futures prices and by some expert forecasts, and is consistent with the causal ordering of prior-day futures, subsequent forecasts, and cash prices realized one quarter later. Forecast error decompositions indicate expert forecasts are substantially influenced by futures prices, but have more influence on futures and cash hog prices than previously identified.

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Information Transmission between Hog Futures and Expert Price Forecasts

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What Drives How Much Crop Producers Sell in Spot, Forward, and Futures Markets?

Crop producers have numerous marketing and risk management tools available. Research relating pro... more Crop producers have numerous marketing and risk management tools available. Research relating producers' risk attitudes to their use of these tools has produced mixed results, and most studies focus on individual tools to the neglect of complementarities among them. Hence, little is known about the proportion in which these tools are used, e.g., the percentage of the crop that is forward sold as opposed to hedged. This study identifies some factors, including risk attitude, that impact the proportion of corn producers' sales through spot markets, futures and options, and forward and production contracts using complementary survey and accounting data.

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Do Interest Rates Explain Disaggregate Commodity Price Growth?

The storage at a loss paradox - inventories despite an inadequate spot-futures price spread to co... more The storage at a loss paradox - inventories despite an inadequate spot-futures price spread to cover storage costs - is an unresolved issue of long-standing interest to economists. Alternative explanations include risk premiums for futures market speculators, convenience yields from holding inventories, and mismeasurement/aggregation of data. Statistical analyses of regional- and elevator-level data suggest that aggregation can impact results, and that soybean price behavior is generally consistent with inter-temporal arbitrage conditions, while corn price behavior points to convenience yields at longer horizons.

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Information Transmission between Livestock Futures and Expert Price Forecasts

We evaluate dynamic interaction between four expert forecasts, futures prices, and realized cash ... more We evaluate dynamic interaction between four expert forecasts, futures prices, and realized cash hog prices. Lag structures of three variable vector autoregression indicate dynamic interaction among futures and cash markets and that past forecasts impact cash prices. Causal analysis of model residuals reveals contemporaneous causation of cash prices by futures prices and by some forecasts, and in all cases indicates causal structures consistent with the chronological ordering of prior day futures, subsequent forecasts, and cash prices realized one quarter later. Error decompositions following this ordering indicate expert forecasts are somewhat more important to futures and cash markets than previously believed.

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Is Storage at a Loss Merely an Illusion of Spatial Aggregation?

The storage-at-a-loss paradox—stocks despite inadequate price growth to cover storage costs—is an... more The storage-at-a-loss paradox—stocks despite inadequate price growth to cover storage costs—is an unresolved issue of long-standing interest to economists. Alternative explanations include risk premiums for futures market speculators, convenience yields from holding stocks, and mismeasurement/aggregation of data. Statistical analyses of regional and elevator corn and soybean price growth in Illinois suggest limited aggregation effects and reveal a pattern of regional- and elevator-level backwardations in the presence of Illinois corn stocks that is inconsistent with aggregation explanations for storage at a loss. Interviews with elevator managers support the existence of convenience yields.

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Do Transaction Costs and Risk Preferences Influence Marketing Arrangements in the Illinois Hog Industry

Journal of Agricultural and Resource Economics, 2008

Risk reduction and transaction costs are often used to explain contracting in the U.S. hog indust... more Risk reduction and transaction costs are often used to explain contracting in the U.S. hog industry with little empirical support. Using a unified conceptual framework that draws from risk behavior and transaction cost theories, in combination with unique survey and accounting data, we demonstrate that risk preferences and asset specificity impact Illinois producers’ use of contracts and spot markets. In particular, producers’ investments in specific hog genetics and human capital are related to selection of long-term marketing contracts over spot markets. Producers who perceive greater levels of price risk and/or are more averse are more (less) likely to use contracts (spot markets).

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Is Storage at a Loss Merely an Illusion of Aggregation

The storage at a loss paradox of positive inventories despite inadequate spot-futures price sprea... more The storage at a loss paradox of positive inventories despite inadequate spot-futures price spread coverage of storage costs is an unresolved issue of long-standing interest to economists. Alternative explanations include risk premiums for futures market speculators, convenience yields from having inventories on hand, and the mismeasurement/aggregation of data. T-test analyses of disaggregated data suggest soybean price behavior consistent with intertemporal arbitrage conditions and corn price behavior that may imply convenience yields.

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Measuring Risk Attitude and Relation to Marketing Behavior

Researchers employ various measures of risk attitudes to investigate their relation to market beh... more Researchers employ various measures of risk attitudes to investigate their relation to market behavior with mixed results. We find that a higher-order global risk attitude construct, developed using survey scales and experiments based on expected utility theory, is related to several marketing alternatives, but does not exhibit substantially greater explanatory power than underlying measures. With few exceptions, scales yield greater significance of risk attitudes for these choices, but experimental measures reveal other insights, e.g., differential attitudes in gain and loss domains. Given recent concerns with experimental measures in the literature, we suggest studies include scales as a low cost supplemental measure.

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Measuring the effect of risk attitude on marketing behavior

Agricultural Economics, 2014

Despite extensive study, researchers continue to search for consistent and reliable measures of r... more Despite extensive study, researchers continue to search for consistent and reliable measures of risk preferences to explain market behavior. We find that a measure, combining experiments rooted in expected utility theory and measures derived from surveys, explains spot and contractual sales, but does not exhibit substantially greater explanatory power than its underlying components. Survey-based measures are generally more significant indicators of marketing choices, but experimental measures reveal how risk attitudes vary over a range of probable outcomes, which is important in light of increased commodity price volatility. Given recently identified limitations on the applicability of expected utility theory, we suggest that researchers include survey methods to obtain low-cost supplemental measures.

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Cross-Hedging Fishmeal: Exploring Corn and Soybean Meal Futures Contracts

Aquaculture Economics & Management, 2011

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Insights from Lob Data on Intraday Liquidity Measures

SSRN Electronic Journal

Plural forms and differentiation strategies in the agri‐food sector: Evidence from the U.S. wine industry

Agribusiness

This article investigates how measurement ability, trust, and the pursuit of differentiation stra... more This article investigates how measurement ability, trust, and the pursuit of differentiation strategies influence the adoption of plural forms in an agri‐food system. We analyze a unique dataset of 314 winegrape sourcing choices from 74 wineries located in five U.S. states, investigating how the pursuit of differentiation influences the likelihood of adoption of a plural form—that is, the simultaneous adoption of a formal arrangement (i.e., vertical integration or long‐term formal contract) and an informal arrangement (i.e., informal contracts or spot‐market transactions). Consistent with previous studies, measurement ability and the existence of trust are both associated with a higher likelihood of adoption of informal arrangements in comparison to formal arrangements. Moreover, we show that the likelihood of adoption of a plural form increases as the differentiation potential of a winegrape variety also increases. Finally, we find that the use of plural forms is associated with a ...

Commercial Grain Merchandisers: What Do They Need to Know?

Little information exists on grain merchandisers, their characteristics, and the skills needed to... more Little information exists on grain merchandisers, their characteristics, and the skills needed to be successful. This research contributes toward filling this gap. A summary of survey responses from 230 experienced grain merchandisers quantifies personal characteristics, skills perceived as important, and desire for executive education. Parametric analyses identify factors contributing to merchandisers' salaries and their interest in establishing a certification process. Interestingly, experience but not formal education significantly enhances salaries.

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Changing Agricultural Marketing Channel Structures: Interdependences & Risk Preferences

We propose a conceptual model that integrates transaction cost and risk behavior theories in an i... more We propose a conceptual model that integrates transaction cost and risk behavior theories in an interdependence framework. Hypotheses are offered that relate the concepts that are central to the proposed model to the three dimensions of channel structures: the allocations of uncertainty, decision rights, and gains. An empirical research design is proposed to test the validity of the conceptual model within the context of the broiler and grain industries. The conceptual model will be validated in a structural equation modeling framework.

Cross-Hedging Distillers Dried Grains Using Corn and Soybean Meal Futures Contracts

Ethanol mandates have led to an increase in the production of distillers dried grains (DDGs), a c... more Ethanol mandates have led to an increase in the production of distillers dried grains (DDGs), a co-product of ethanol production that is incorporated into livestock rations. As with most competitive industries, there is some level of price risk in handling DDGs, and there is no DDG futures contract available for managing price risk. Commonly, DDGs are hedged using only corn futures. Our results suggest that cross-hedge risk may be reduced by including soybean meal futures in an encompassing cross-hedge strategy. Further, we also conclude soybean meal futures currently may be slightly more effective at reducing risk than in the past.

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Horizon and Portfolio Investment Constraints in Agricultural Cooperatives

Contributions to Management Science, 2019

Though horizon and portfolio problems are commonly thought to limit cooperatives’ ability to capi... more Though horizon and portfolio problems are commonly thought to limit cooperatives’ ability to capitalize on investment opportunities, empirical inquiry into the existence of these constraints is sparse, and recent conceptual arguments suggest that the horizon problem in particular may be less severe than commonly believed. Using surveys of members of three cooperatives, this study investigates the extent to which indicators of potential horizon and portfolio problems influence members’ preferences for cooperative investment in value-added processing technology. The evidence points to the existence of three types of horizon problems and two types of portfolio problems influencing cooperative members’ investment preferences.

Consumers’ Willingness-to-Pay for Retail Branded Beef Products with Bundled Attributes

With a declining share of the domestic meat market, some beef producers are becoming more attenti... more With a declining share of the domestic meat market, some beef producers are becoming more attentive to opportunities for value-added products tailored to the desires of certain consumer segments. Using a survey of St. Louis and Kansas City, Missouri meat consumers, this study investigates perceptions of and willingness-to-pay for various value-added attributes that could be supplied as retail branded beef products. Factor analysis identifies two alternative attribute bundles as branding strategies based on perceived importance and complementarity of attributes. Nonparametric procedures provide conservative estimates of willingness-to-pay. Parametric methods identify types of consumers willing to pay significantly higher premiums.

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Forecasting Quality Grade and Certified Angus Beef Premiums

Journal of Agribusiness, 2017

We determine the mean squared error and mean absolute percentage error of alternative forecasts o... more We determine the mean squared error and mean absolute percentage error of alternative forecasts of quality grade and Certified Angus Beef® (CAB) premiums, which may be of interest to cow-calf producers, feeders, packers, retailers, and food service providers. A supply and demand model and a vector autoregressive (VAR) model outperform a naïve model accounting for only seasonal effects for all premiums except the strongly seasonal choice-select spread. While there is no significant difference between the supply and demand model and the VAR model in terms of mean squared error, the supply and demand model outperforms the VAR model based on the mean absolute percentage error in predicting the CAB-choice premium.

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How do transaction costs, capabilities and networks influence the procurement strategies of small agri-food firms? Evidence from the wine industry

Journal of Small Business and Enterprise Development, 2021

PurposeThe purpose of this study is to disentangle the drivers of adoption of procurement strateg... more PurposeThe purpose of this study is to disentangle the drivers of adoption of procurement strategies in situations where small agri-food firms deal with constrained organizational choices. More specifically, the authors investigate the role of transaction costs, capabilities and networks in the definition of feasible “make-or-buy” choices in emerging wine regions.Design/methodology/approachThis article analyzes a unique dataset of small wineries from five US states: Illinois, Michigan, Missouri, New York and Vermont. The reported results derive from both a hurdle model (i.e. a probit model and a truncated regression model) and a tobit model.FindingsThe results suggest the importance of trust as a replacement for formal governance structures whenever small firms deal with highly constrained sets of organizational choices. On the other hand, the level of dependence on a limited mix of winegrape varieties and the perception that these varieties are fundamental in building legitimacy he...

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