The use of futures markets for the purpose of hedging output subject to price uncertainty has been the focus of several recent studies. Danthine [4], Feder, Just and Schmitz (FJS) [5], and Holthausen [7] argue that the producer's ability to sell output forward in the futures market (i.e., to become a short hedger) effectively insulates the optimal production decision from the effects of price uncertainty. This result is in marked contrast to the standard treatment of production under price uncertainty (e.g., Sandmo [14] and Batra and Ullah [2]), where output in the absence of hedging opportunities is an increasing function of the producer's expectation of the output's future spot price and a decreasing function of his degree of risk aversion and the amount of price risk. It is important to note, however, that this optimality property of futures markets crucially relies upon the implicit assumption that producers are able to obtain perfect time hedges-i.e., the delivery date of the futures contract coincides with the marketing date of the output. In actuality, of course, this circumstance is quite rare due to institutional restrictions (i.e., contracts traded on organized commodity exchanges have standardized maturities, usually at three month intervals), so that typically producers must either overhedge or underhedge temporally (e.g., hedge output coming to fruition in four months with either a three month or six month futures contract). This paper examines the implication of this reality for the optimal production and hedging decisions of producers and establishes that in general the optimality result does not hold.' In addition, a more general model which does not make the