Mark R. Manfredo

Southern Illinois University Carbondale, Illinois, United States

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Publications (62)15.23 Total impact

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    ABSTRACT: Forward pricing contracts for soybean oil are important supply chain arrangements in both the biodiesel and food industries. Forward pricing is often extended to end-users by soybean oil processors where the forward price quote is a function of the Chicago Board of Trade (CBOT) futures price and the cash-futures basis. Upon entering a forward pricing agreement, the processor (seller) assumes the risk associated with basis fluctuations. This research examines if soybean oil processors extract a market premium for assuming this risk. Using forward basis quotes and subsequent realized basis values for soybean oil, it is found that soybean oil processors do not charge an embedded cost for their forward pricing services. Furthermore, the results suggest that the absence of a statistically significant embedded cost may be due to the lack of predictability in the basis or the inability of soybean oil processors to adequately forecast soybean oil basis levels.
    Agribusiness 12/2014; · 0.52 Impact Factor
  • Karen E. Lewis, Mark R. Manfredo
    Journal of Agribusiness. 10/2012;
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    ABSTRACT: Analysts’ forecasting of earnings per share for multiple quarter time horizons of eleven agribusiness companies is evaluated using a mean absolute scaled error and a direct test. Results illustrate that unique information is consistently found. Rational and efficient expectations are formed periodically. Analysts’ performance declines as the time horizon increases.
    01/2012;
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    ABSTRACT: Professional analysts' estimates of earnings per share (EPS) provide a rare source of forward-looking information regarding the financial performance of publicly traded firms. Although numerous studies in the economics, finance, and accounting literatures have examined the properties of these forecasts and provided general insight into their performance, no known research explicitly examines the performance of analysts' EPS estimates for publicly traded food companies. This issue is particularly relevant given the influence that publicly traded agribusiness companies maintain in the agro-food supply chain (Vickner, 2002). Focusing on quarterly consensus estimates of EPS for 11 of the largest publicly traded food companies based on capitalization, the authors examine the point accuracy of these estimates through the introduction of the mean absolute scaled error measure, their performance over time, as well as their optimal forecast properties of bias, efficiency, and forecast encompassing. Results suggest that professional analysts, on average, produce EPS estimates that are more accurate than time series alternatives, yet the differences are often not statistically significant. For many of the firms examined, analysts' EPS estimates are found to be biased, inefficient, and do not encompass information in simple time series alternatives. For many firms in the sample, forecast accuracy has decreased over time. However, it is difficult to determine if this decline in forecast accuracy is due to turnover of analysts in the wake of increased financial market regulation (e.g., Sarbanes-Oxley), decline in forecasting skill, or structural changes in the food industry, which make it more difficult to forecast earnings over time. [EconLit citations: Q140; G170; M490]. © 2010 Wiley Periodicals, Inc.
    Agribusiness 06/2011; 27(3). · 0.52 Impact Factor
  • Ram N Acharya, Albert Kagan, Mark R. Manfredo
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    ABSTRACT: This paper models the dynamic interactions between product prices at different regional markets and input costs and derives cost-price thresholds that can be used to evaluate alternative product sourcing and procurement strategies. The model is tested empirically by estimating a vector autoregressive model using data from the U.S. leafy green industry.
    Journal of Business Logistics. 05/2011; 30(1):223 - 242.
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    Mark R. Manfredo, Dwight R. Sanders
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    ABSTRACT: The Department of Energy's (DOE) Energy Information Administration (EIA) provides energy supply forecasts over a number of forecast horizons. This research examines the informational content of the DOE's quarterly supply forecasts for crude oil, natural gas, coal, and electricity made for one-, two-, three-, and four- quarters ahead. We specifically consider the information provided in longer-term forecasts relative to the information provided by short-term forecasts. Results suggest there is valuable information provided in the EIA's forecasts from one- to four- quarters ahead. However, forecasts are often not rational, suggesting the use of a composite forecast incorporating the information from both nearby and more distant horizon forecasts.
    01/2011;
  • Dwight R. Sanders, Mark R. Manfredo, Keith Boris
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    ABSTRACT: The United States Department of Energy's (DOE) quarterly price forecasts for energy commodities are examined to determine the incremental information provided at the one-through four-quarter forecast horizons. A direct test for determining information content at alternative forecast horizons, developed by Vuchelen and Gutierrez [Vuchelen, J. and Gutierrez, M.-I. “A Direct Test of the Information Content of the OECD Growth Forecasts.” International Journal of Forecasting. 21(2005):103–117.], is used. The results suggest that the DOE's price forecasts for crude oil, gasoline, and diesel fuel do indeed provide incremental information out to three-quarters ahead, while natural gas and electricity forecasts are informative out to the four-quarter horizon. In contrast, the DOE's coal price forecasts at two-, three-, and four-quarters ahead provide no incremental information beyond that provided for the one-quarter horizon. Recommendations of how to use these results for making forecast adjustments is also provided.
    Energy Economics 03/2009; · 2.54 Impact Factor
  • Mark R. Manfredo, Timothy J. Richards
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    ABSTRACT: Weather derivatives represent an important financial innovation for risk management. As with the use of any derivatives contract, the behaviour of the basis ultimately determines the net-hedged outcome. However, when using weather derivatives to hedge volumetric risks, risk managers often face unique basis risks arising from both the choice of weather station where a derivatives contract is written, as well as the relationship between the hedged volume and the underlying weather index. Using the encompassing principle, this research shows that the nonlinear relationship often found between crop yields and weather creates a specific hedging role for options. The results suggest that weather derivative instruments with nonlinear pay-offs, such as options, be used solely or in combination with linear payoff instruments, such as swaps or futures, to minimize basis risk associated with the nonlinear relationship between yields and weather. This research also suggests that the choice of weather station may be less critical in managing basis risk than properly accounting for the relationship between yields and weather.
    Applied Financial Economics 01/2009; 19(2):87-97.
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    ABSTRACT: Insect derivatives represent an important innovation in specialty crop risk management. An active over-the-counter market in insect derivatives will require a transparent pricing method. This paper develops an econometric model of the spatio-temporal process underlying a particular insect population and develops a pricing model based on this process. We show that insect derivatives can play an important risk management role in mitigating "B. tabaci" (whitefly) damage in cotton. Beyond developing a new risk management instrument, the key methodological contribution of this paper lies in pricing derivatives with stochastic properties in both space and time dimensions. Copyright Copyright 2008 Agricultural and Applied Economics Association.
    American Journal of Agricultural Economics 11/2008; 90(4):962-978. · 1.36 Impact Factor
  • Dwight R. Sanders, Mark R. Manfredo, Keith Boris
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    ABSTRACT: One-step-ahead forecasts of quarterly crude oil, natural gas, electricity, and coal supplies are evaluated under two general approaches: accuracy-based measures and classification- or directional-based measures. Results suggest the U.S. Department of Energy (DOE) supply forecasts for U.S. domestic energy products are generally more accurate than a naïve alternative. There is only limited evidence of bias and inefficiency in the forecasts; although there is some evidence of error repetition. Directional forecasts for supply changes are statistically better than random, but they generally do not outperform a naïve forecast.
    Energy Economics 05/2008; · 2.54 Impact Factor
  • Mark R. Manfredo, Dwight R. Sanders
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    ABSTRACT: Cash forward contracting is a common, and often preferred, means of managing commodity price risk in many industries. Despite this, little is known about the performance of cash forward markets, in particular the role they play in price discovery. The US lumber market provides a unique case for examining this issue. The Bloch Lumber Company maintains an active cash forward market for many lumber products, and publishes benchmark forward prices on their website and disseminates these prices to data vendors. Focusing on 2×4 random lengths lumber and 7/16 oriented strand board, this research examines the lead–lag relationships between the 3-month forward prices published by Bloch Lumber, representative spot prices, and lumber futures prices at the Chicago Mercantile Exchange. Results suggest that at least for 2×4 random lengths lumber, the forward prices published by Block Lumber lead both the spot price and futures price, suggesting that this private cash forward market provides some level of price discovery in the lumber markets.
    Journal of Forest Economics 01/2008; · 1.79 Impact Factor
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    Dwight R. Sanders, Mark R. Manfredo
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    ABSTRACT: United States Department of Agriculture (USDA) livestock production forecasts are evaluated for their information content across multiple forecast horizons using the direct test developed by Vuchelen and Gutierrez (2005). Forecasts are explicitly tested for rationality (unbiased and efficient) as well as for incremental information out to three-quarters ahead. The results suggest that although the forecasts are often not rational, they typically do provide the forecast user with unique information at each horizon. Turkey and milk production forecasts are found to provide the most consistent performance, while beef production forecasts provide little information beyond the two-quarter horizon. [C53, Q13] © 2008 Wiley Periodicals, Inc.
    Agribusiness 01/2008; 24(1):55-66. · 0.52 Impact Factor
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    Mark Manfredo, Dwight Sanders, Winifred Scott
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    ABSTRACT: Decisions made by publicly traded agribusinesses impact suppliers, processors, farmers, and even rural communities. Professional analysts’ estimates of earnings per share (EPS) provide a unique source of information regarding firm-level financial performance. Incorporating a battery of tests, this research examines the forecast properties of consensus analysts’ EPS estimates reported in the Institutional Brokers Estimate System for a sample of publicly traded food companies. While the results are mixed among firms, they suggest 1) analysts forecasts are largely unbiased but inefficient, and may not encompass information in simple time series models, and 2) EPS may be becoming more difficult to estimate.
    Western Agricultural Economics Association, 2008 Annual Meeting, June 23-24, 2008, Big Sky, Montana. 01/2008;
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    Mark R. Manfredo, Timothy J. Richards
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    ABSTRACT: Numerical simulation of several typical risk management strategies using pro forma financial statements from representative U.S. dairy cooperatives shows that combinations of forwards, swaps, and cash marketing strategies for output (cheese), along with various forward contracts offered to cooperative members to manage the variability of milk revenues, have the potential to improve cooperative-, and ultimately member-level risk-return performance. Because most cooperatives have limited access to equity capital, effective use of available risk management tools can increase cooperative value by increasing debt capacity, avoiding bankruptcy costs, and preventing the distortion of capital budgeting decisions. Moreover, the offering of risk management tools to individual members as a service may prove valuable in the retention of these members in the cooperative.
    Agricultural Finance Review 11/2007; 67(September):311-339.
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    Dwight R. Sanders, Mark R. Manfredo
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    ABSTRACT: This research presents a systematic and unified approach to evaluating forecast rationality that considers the potential of nonstationarity in forecasts and realized values. The approach is applied to one-quarter ahead U.S. Department of Agriculture livestock price forecasts from 1982 through 2004. Results show that forecasts and realized prices are integrated of the same order, and those that are nonstationary are cointegrated. However, the stationary price forecasts for hogs, turkeys, eggs, and milk are biased and improperly scaled, and forecast errors tend to be repeated. Similarly, nonstationary forecasts for cattle and broilers are also biased and irrational in the long run, but short-run dynamics are rational.
    Journal of Agricultural and Applied Economics. 01/2007; 39(01).
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    Dwight R. Sanders, Philip Garcia, Mark R. Manfredo
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    ABSTRACT: The marginal forecast information contained in deferred futures prices is evaluated using the direct test of Vuchelen and Gutierrez. In particular, the informational role of deferred futures contracts in live cattle and hogs is assessed from the two- to twelve-month horizons. The results indicate that unique information is contained in live cattle futures prices out through the ten-month horizon, while hog futures prices add incremental information at all tested horizons. Practitioners using futures-based forecasting methods are well-served by deferred hog futures prices; however, live cattle futures listed beyond the 10 month horizon are not adding incremental information.
    NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management, 2007 Conference, April 16-17, 2007, Chicago, Illinois. 01/2007;
  • Dwight R. Sanders, Mark R. Manfredo
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    ABSTRACT: Value-at-Risk (VaR) estimates the downside risk of a portfolio of market-priced assets at a particular confidence level over a specified time horizon. This article is a tutorial that introduces purchasing managers to the concept of VaR and its potential applications in the purchasing process. It discusses estimation alternatives and issues, and then examines and highlights the role of VaR in the context of a commodity end user with a specific example for a foodservice business. Further, the practical implementation issues of VaR in a corporate environment in general and the purchasing function in particular are discussed. The example and discussions are widely applicable to any commodity end user (e.g., energies, metals, or food-related commodities), providing potential applications to practitioners and research ideas to academics.
    Journal of Supply Chain Management 04/2006; 38(2):38 - 45. · 3.72 Impact Factor
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    Mark R. Manfredo, Dwight R. Sanders
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    ABSTRACT: This research examines the lead-lag relationships between futures prices, prices from a cash forward market, and spot prices for two forest product markets. Results suggest that for 2x4 lumber, the forward market provides some level of price discovery, but futures play a dominant price discovery role for oriented strand board.
    02/2006;
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    Dwight R. Sanders, Mark R. Manfredo
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    ABSTRACT: A battery of time series methods are compared for forecasting basis levels in the soybean futures complex: soybeans, soybean meal, and soybean oil. Specifically, nearby basis forecasts are generated with exponential smoothing techniques, autoregression moving average (ARMA), and vector autoregression (VAR) models. The forecasts are compared to those of the 5-year average, year ago, and no change methods. Using the 5-year average as the benchmark method, the forecast evaluation results suggest that alternative naive techniques may produce better forecasts, and the improvement gained by time series modeling is relatively small. In this sample, there is little evidence that the basis has become systematically more difficult to forecast in recent years.
    Journal of Agricultural and Applied Economics. 02/2006; 38(03).
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    Mark R. Manfredo, Dwight R. Sanders
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    ABSTRACT: Conventional wisdom suggests the local cash - futures basis is determined from local supply and demand conditions. However, it may be the case that local elevators look to other locations, such as terminal locations, and adjust for transportation differentials when determining the basis for their particular market. If so, certain grain marketing locations (e.g., export and interior terminal locations) may play an important role in discovering and ultimately determining the basis for other local markets. This hypothesis is examined for the #2 yellow corn basis at various export terminal (Gulf; Toledo), river terminal (Illinois River; Omaha) and interior (S. Central Illinois; N. Central Iowa; Denver) locations. Specifically, if the basis calculated at one market location is found to lead the basis at another market location, then this suggests that the leading market plays a role in determining the basis for the other market. The findings suggest that corn basis calculated at the export terminal markets of Toledo and the U.S. Gulf, as well as the Illinois River, may indeed provide valuable information in determining the basis for other river terminal and interior locations.
    NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management, 2006 Conference, April 17-18, 2006, St. Louis, Missouri. 01/2006;

Publication Stats

289 Citations
15.23 Total Impact Points

Institutions

  • 2011
    • Southern Illinois University Carbondale
      • Department of Agribusiness Economics
      Illinois, United States
  • 1998–2011
    • Arizona State University
      • Morrison School of Agribusiness and Resource Management
      Phoenix, Arizona, United States
    • University of Illinois, Urbana-Champaign
      • Department of Agricultural and Consumer Economics
      Urbana, IL, United States