Publication Date


Series Number

03-WP 336


Some long-term marketing contracts in the North American hog sector provide for price-dependent loan agreements at low rates. We show that these provisions linking pricing with financing are hybrids between forward rate agreements and commodity options. This observation presents approaches for valuing the stipulations. We suggest that the ledger arrangement is transaction-cost efficient, especially for a packer with a natural partial pass-through hedge from retail market positions.

Publication Information

This working paper was published as Hennessy, David A. and Donald Lien, "Ledger provision in hog marketing contracts," Agricultural Finance Review 66 (2006): 77–89, doi:10.1108/00214660680001181.