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Potential demand for hedging by Australian wheat producers

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Author Info

  • Simmons, Phil
  • Rambaldi, Alicia N.

Abstract

The potential for hedging Australian wheat with the new Sydney Futures Exchange wheat contract is examined using a theoretical hedging model parametised from previous studies. The optimal hedging ratio for an `average' wheat farmer was found to be zero under reasonable assumptions about transaction costs and based on previously published measures of risk aversion. The estimated optimal hedging ratios were found by simulation to be quite sensitive to assumptions about the degree of risk aversion. If farmers are significantly more risk averse than is currently believed, then there is likely to be an active interest in the new futures market.

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File URL: http://purl.umn.edu/118012
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Bibliographic Info

Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

Volume (Year): 41 (1997)
Issue (Month): 2 (June)
Pages:

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Handle: RePEc:ags:aareaj:118012

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Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200
Phone: 0409 032 338
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Related research

Keywords: Crop Production/Industries; Marketing; Risk and Uncertainty;

References

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  1. Vincent, David P & Dixon, Peter B & Powell, Alan A, 1980. "The Estimation of Supply Response in Australian Agrucilture: The CRESH/CRETH Production System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 221-42, February.
  2. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
  3. Bardsley, Peter & Harris, Michael, 1987. "An Approach To The Econometric Estimation Of Attitudes To Risk In Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 31(02), August.
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Citations

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Cited by:
  1. Simmons, Phil, 2002. "Why do farmers have so little interest in futures markets?," Agricultural Economics, Blackwell, vol. 27(1), pages 1-6, May.
  2. Simmons, Phil, 1999. "Does Separation Theorem Explain Why Farmers Have So Little Interest In Futures Markets?," Working Papers 12933, University of New England, School of Economics.
  3. East, Miriam, 2005. "Issues Of Geographical Basis Risk In Weather Derivatives For Australian Wheat Farmers," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 137861, Australian Agricultural and Resource Economics Society.
  4. Williams, John & Malcolm, Bill, 2012. "Farmer decisions about selling wheat and managing wheat price risk in Australia," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 20.

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