Crop Production Contracts and Marketing Strategies: What Drives Their Use?

Abstract

Numerous crop marketing and risk management tools are available. Research relating producers' risk attitudes to their use of these tools has produced mixed results, and most studies focus on individual tools, neglecting potential complementarities in information they provide. Little is known about the proportion in which individual tools are used, e.g., the percentage of the crop that is forward sold as opposed to hedged. This study identifies factors, including risk attitude, that impact the proportion of corn and soybean producers' sales through spot markets, futures, and options, as well as forward and production contracts, and investigates contract complementarity and substitutability using survey and accounting data, and causal modeling. [Econ Lit classification: Q130]. C 2012 Wiley Periodicals, Inc. 1 Bryant et al.'s (2006) evaluation of causal hypotheses stemming from theories of futures markets is perhaps the most familiar application of causal analysis. The authors rejected hypotheses regarding the hedging pressure theory of futures market risk premiums (i.e., the generalized version of Keynes' [1930] normal backwardation theory) and theories that speculative activity affects price volatility.

Factors influencing hedging decision: evidence from Brazilian citrus growers

“…Franken et al . () concluded that age, experience, educational level, debt‐to‐asset ratio and risk aversion influenced the use of farmers’ risk management strategies in the United States. Velandia et al .…”

Les contrats de production en grandes cultures. Coordination et incitations par les coopératives

“…Pourtant, peu d'études s'intéressent aux contrats entre agriculteurs et coopératives dans ce secteur. Si le développement des contrats de commercialisation, comme outil de gestion des risques, a fait l'objet de travaux (Ricome et al, 2008 ;Franken et al, 2012), la diversité des contrats existants demeure mal connue. Cet article contribue à une meilleure compréhension de cette diversité contractuelle en se focalisant plus particulièrement sur les contrats de production.…”

Measuring the effect of risk attitude on marketing behavior

“…Papers citing Pennings and Garcia () typically acknowledge the comprehensive approach combining scale and experimental measures of risk attitude and proceed to use one or the other measure individually in their own work (e.g., Franken et al., ; Hudson et al., ; Lusk and Coble, ) or reference the use of factor analysis to combine measures (e.g., Pope et al., ; Tonsor et al., ).…”