Calculate the optimal hedge ratio for corn imported input of Iran poultry industry

The poultry meat and egg production, over the past years, has experienced upward trend in Iran. Production and distribution of products in the poultry industry needed to provide inputs. Corn is one of the most important inputs that can be pointed to it. Much of the corn required is provided by imports. Participation in the world futures markets or launch a futures market in Iran, as a tool of hedging, have significant role in reduce volatility of input and products prices as well as improving the welfare of consumers. The question that arises is that what amount of purchase is necessary as future purchase? This is the hedge ratio.
The main objective of this study was to calculate the hedging rate
that is calculated with two models: “Minimum variance” and “Mean- variance”. For this purpose, the monthly data of spot and futures prices of corn and exchange rates in the period March 2010 to February 2014 is used. The data are collected from the Islamic Republic of Iran Customs, the Central Bank of Iran and the Chicago Board.
The results show that if 79% of the corn as future purchase, 57% of price risk decreases. With the entry of exchange rate to the models, hedge ratio is greatly increased, and if hedging instruments does not increase, the efficiency decreased.
The results suggest that importers and politicians consider the participation in world futures markets and the creation of a futures market in Iran as a hedging instrument.