The behavior of forward-looking firms in the very short run

• Published in: American journal of agricultural economics Vol. 77; no. 4; pp. 922 - 934
• Main Authors: Lence, Sergio H., Hayes, Dermot J., Meyers, William H.
• Format: Journal Article
• Language: English
• Published: Menasha, Wis Oxford University Press 01-11-1995; American Agricultural Economics Association; American Farm Economic Association; Blackwell Publishing Ltd
• Subjects: Agricultural economics; Agricultural prices; Agricultural production; ALMACENAMIENTO; Behavior; Cash; Cash flow; Cash sales; COMERCIO; COMMERCE; COMPETENCIA ECONOMICA; Competition; Competitive firms; CONCURRENCE ECONOMIQUE; Crushing; D210; Decision making; Economic theory; EMPRESAS; ENTREPRISE; ETATS UNIS; EUA; Expected utility; Final goods; forward trading; forward-looking behavior; Futures; Futures market; Futures markets; Hedging; Interest rates; Inventory; MODELE MATHEMATIQUE; Modeling; MODELOS MATEMATICOS; Price elasticity; Prices; PRODUCCION ALIMENTARIA; PRODUCTION ALIMENTAIRE; Production functions; Q120; RIESGO; Risk aversion; RISQUE; separation property; SOJA; Soyabeans; soybean processing; Soybeans; Stock sales; STOCKAGE; Storage; TECHNOLOGIE ALIMENTAIRE; TECNOLOGIA DE LOS ALIMENTOS; U.S.A; Utility functions; very-short-run firm behavior
• ISSN: 0002-9092; 1467-8276
• DOI: 10.2307/1243815

The study develops a theory of very-short-run forward-looking behavior allowing for forward trading and storage of final good and material input. Production and storage are separable from hedging decisions and depend only upon current forward and cash prices. Comparative statics are derived regarding production, purchases, and sales. The hypotheses advanced are tested with monthly data pertaining to the U.S. soybean-processing industry. Results suggest that in short-run equilibrium futures prices of the soybean complex have had little influence on crushings or production, but they have been important determinants of inventory levels.