Research On Applications Of Futures Hedging Strategies To The Grain Enterprises

In recent years quick development of futures markets and profuse species for trade provide betterterms for companies to hedge. In China futures markets start from foodstuffs which is the matter vital tonational wellbeing and the people’s livelihood, so it is of important practical meanings to study how grainindustries are applied to commercialization of food. Futures markets, as the top form of market economy,are vital for the reform of the grain distribution system and the improvement of the grain market. Under thebackground of economic globalization and grain marketization, a company’s assets have more uncertainexternal factors and they are affected by wildly-fluctuating prices; they badly need futures markets todisperse risk. However, in Chinese grain industries the application of futures markets to hedge is notenough. With the improvement of economic globalization and grain marketization, for Chinese grainindustries to operate risk management, it is a supreme need to learn the managerial functions of futuresmarkets and to apply modern financial technology to hedge. This is very important for the development andcompetitive advantage of Chinese grain industries.Based on the reality of grain industries’ assets, the paper is seeking a plan for companies to hedge bythe analysis of actual cases and empirical study. This paper first discusses the present situation of Chinesegrain market and the hedging theories, offer an opinion of conditions of Chinese grain enterprises using thefutures market to hedging are gradually ripe and the demand of grain enterprises using the futures market tohedging is continuously improved, the theory of hedging trend to close the development of internationalresearch. Secondly, It analyses every link in a complete hedging strategy, such as the need, the basis, therate, the coat and profit, the risk. The paper sums up the need for companies to hedge through analysis. ItInclude: locking corporate profit, maintaining the value of enterprises’ stock, reducing the cost of inventory, securing the raw material procurement channels and raising the enterprises’ credit and other aspects. Onceagain, It also measures the hedging rate of soybean with minimum variance hedging rate model, ordinaryleast square estimation simple linear regression model and double vector auto regression model. In the endof the article, risk management in soybean international trade as example, we conclude that half hedging isbetter for companies to lower the profile volatility than whole hedging, after contracting their cost andprofile.