A study of marketing options for Cotton Australia

Date Issued:1989-06-30


Objective of Research Project: To provide growers with knowledge of the workings and relative merits of available marketing options by making them aware of each marketing methods' revenue potential and income stability. * Extent to which project objectives have been achieved: Given the results and the wide exposure they received when they were published in The Australian Cottongrower, it appears that the project objectives have been achieved. � *Research Results: It was concluded that no single marketing strategy would have returned significantly higher returns over the 1973-74 to 1987-88 period. Hence, the focus of the study became the price stability or risk characteristics of each alternative. The results indicated that a grower can trade off the costs of hedging through the call pool option provided by processors against the reduction in price risk that hedging provides compared to the alternative selling methods studied. This is because the basis risk faced when hedging is typically less than the price risk faced in the cash market In addition, it was concluded that yield variability must be taken into account when deciding on a marketing strategy. In certain circumstances, significant crop losses may expose the grower to additional financial loss.

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