| Abstract: | The use of futures in copper marketing became common during the 1990s, but little attention has been put on the reasons for it and its relationship with other elements of marketing such as forward sales and premiums. This study focuses on these issues and the benefit of futures relative to annual forward contracts. It argues futures complement annual forward contracts to secure the average market price rather than to maximize revenue. The paper analyzes empirical evidence for the six largest Chilean copper producers. This sample reflects well the entire Chilean industry during the 1990s. The analysis shows that forward sales became more volatile and futures seem to be the instrument to avoid income fluctuation at the end of the marketing process. However, the benefits of futures compared to forward sales are very modest. In the last section we suggest a better marketing instrument to maximize revenue may be premiums. |
