Finding optimal price risk management instruments: the case of the Spanish potato sector

Bielza, María; Garrido, Alberto; Sumpsi, José María

doi:10.1111/j.1574-0862.2007.00177.x

Cited by 18 publications

(12 citation statements)

References 19 publications

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“…The potato is an important agricultural product, particularly in developing countries, due to its ability to enhance farm income, increase food consumption and create employment in rural areas (Scott et al, 2000;Wang and Zhang, 2010). However, the stability of potato prices is a global problem (Bielza et al, 2007).…”

Section: Introductionmentioning

confidence: 99%

Determination of the Effect of Price Fluctuations on Producer Income – the Case of Potatoes

Arısoy

Bayramoğlu²

2017

Turkish JAF Sci.Tech.

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Prices of agricultural products fluctuate depending upon several factors. In Turkey, potatoes are one of the main products for which price fluctuations are observed. This study was undertaken to determine the effect of the fluctuation in potato prices on producer incomes in Turkey. The Neyman Method was used to determine the sample size. The number of enterprises required to achieve a representative sample size was determined to be 56, with a 5% error margin and a 95% reliability limit. The way in which the potato cultivation area is affected by price was examined. The Koyck model was utilized for this purpose. By using Koyck analysis, average lag time was calculated to be approximately 1 year. This result indicates that the fluctuation in potato prices has quite a rapid effect on production. It was determined that producer income varies greatly depending on annual potato prices. The difference between estimated potato price and the actual price for the year 2012 resulted in an income loss of 11,198.6 $/ha. Some sustainable efforts such as production planning can be recommended to prevent these price fluctuations.

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Section: Introductionmentioning

confidence: 99%

Determination of the Effect of Price Fluctuations on Producer Income – the Case of Potatoes

Arısoy

Bayramoğlu²

2017

Turkish JAF Sci.Tech.

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“…The concentration of ware potato in the EU-5 can be attributed to the production cost advantage of the region and because these countries are situated near big concentrations of consumers (European Commission, 2007). No common market organisation exists within the EU for the ware potato sector (European Commission, 2007;Bielza et al, 2007b), which is the most competitive sector in EU agriculture (European Commission, 2016b). The sector has not benefited from any CAP interventions, either in the form of price support or coupled direct subsidies (European Commission, 2007); however it is eligible for decoupled direct payments under the Single Area Payment Scheme (European Commission, 2007).…”

Section: The Potato Sector In the Eu And The Netherlandsmentioning

confidence: 99%

“…Potato prices are therefore also more volatile than the prices of commodities with highly integrated markets, which can benefit from negative correlation of yields in widely dispersed places . According to Bielza et al (2007b), ware potato growers can be exposed to an inter-seasonal price coefficient of variation that ranges from 30% to 70% (Bielza et al, 2007b).…”

Section: The Potato Sector In the Eu And The Netherlandsmentioning

confidence: 99%

The transmission and management of price volatility in food supply chains

Assefa¹

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The 2006-2011 period has been marked by increased volatility in food an agricultural commodity prices at a global level. In the EU, the continuous liberalization of agricultural markets under the Common Agricultural Policy has led to the exposure of EU agricultural to increasing market price volatility. This thesis has investigated the transmission and management of price volatility in EU food supply chains. The transmission of price volatility in various food supply chains is first investigated through a literature review followed by an empirical analysis of price volatility transmission in the case of the German fresh pork supply chain. The effect of market power was also taken into account in the latter empirical analysis. Next, the management of price volatility was investigated through interviews conducted with actors of selected EU food supply chains. This was followed by the analysis of the effectiveness of selected price volatility management strategies. Lastly, in light of the policy support for agricultural insurance within the Common agricultural policy, premium rates of an agricultural revenue insurance contract were calculated for the Dutch ware potato sector.One of the gaps identified in the reviewed literature is the lack of attention given to the effects of contextual factors on price volatility transmissions in food supply chains. Contextual factors include market power in the chain and pricing strategies (e.g. contracts) by chain actors. Results of the price volatility transmission analysis conducted in this thesis in the case of the German pork chain show that retail market power limited both the transmission of price levels and price volatility. This thesis shows that price volatility is perceived as risky by all actors in the food supply chain. Deviations of prices by more than 10 to 15 % from expected levels were perceived as price volatility by a majority of the chain actors. Results further show that price volatility management strategies in EU food chains are diverse and well beyond traditional instruments such as futures and forward contracts. Contrary to expectations, price fixing contracts were not found to be desirable by interviewed chain actors. This thesis also found that the effectiveness of contracts in reducing price volatility depended on how the contract price was set.Results of this thesis further show that premium rates of a revenue insurance contract for the Dutch ware potato sector across categories of farms. The average premium rates calculated were 32.1%, 22.2%, 33.1% and 24.0% on guaranteed revenue per hectare for the high expected yield, low expected yield, high yield variance to expected yield ratio and low yield variance to expected yield ratio categories of farm, respectively. The difference in premium rates across categories of farms implies that charging the same average premium rate to all Dutch ware potato farms can lead to adverse selection.

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“…Several authors have looked at the problems and viability of farm income insurances as a viable alternative. We can quote Goodwin (2001), Just and Pope (2002), Pérez-Salas (2002b), Bielza (2004), Bielza et al (2002Bielza et al ( , 2007a, Estavillo et al (2005) and Aguado and Garrido (2007).…”

Section: Risk and Agricultural Insurancesmentioning

confidence: 99%

Is there a relation between risk rate and the insurance premium in agricultural insurances?. An application to the citrus sector

Vidal

Parra

López

2009

Span. j. agric. res.

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Agricultural insurance has an essential role as a tool for risk reduction. This is especially important in a changing and uncertain environment as in agriculture. Insurance acts as a compensating mechanism of loss and risk transference between insured and insurer. This paper aims to find if there is a concluding relationship amongst the rates applied by insurance companies; the insurance premium applied to the insured farmers; the real risk level that farms face and the indemnifications that farmers get after a disaster. There were 418 citrus tree farms analysed in Murcia region (Spain) in the period 2002-2006. They were in the line called "Multicultivo de Cítricos y Complementario" (Citrus Multi-crop and Complementary). The correlation coefficients of the different analyses are close to zero (between 0.047 and 0.053). This indicates no relation between the real risk and the rate that insurance companies use. The rate is almost a constant, with no dependence on the risk of suffering damage. The main conclusion is that the present agricultural insurance system is not discriminating enough and the settlement of insurance premiums that insurance companies apply does not maintain any relation to the essential element that should direct an insurance contract: the risk that a disaster has occurred.

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Finding optimal price risk management instruments: the case of the Spanish potato sector

Cited by 18 publications

References 19 publications

Determination of the Effect of Price Fluctuations on Producer Income – the Case of Potatoes

Determination of the Effect of Price Fluctuations on Producer Income – the Case of Potatoes

The transmission and management of price volatility in food supply chains

Is there a relation between risk rate and the insurance premium in agricultural insurances?. An application to the citrus sector

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