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Is The Market Failing Agricultural Producers Who Wish To Manage Risks?

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  • STEVEN C. BLANK
  • COLIN A. CARTER
  • JEFFREY McDONALD

Abstract

The variability of producers 'net income levels is largely a function of variability in output price, yield, and input prices. Yet, the tools available to manage price risk and yield risk are not widely used by producers. Is the market failing to provide agricultural producers with effective risk management tools? To identify producers' needs, the paper establishes the relative importance of price and yield risk by decomposing the variability of revenues from a sample of crops in California agriculture. The risk tools available to producers of those commodities are compared to producers needs for tools. Results indicate that "market failure" is readily apparent in markets for tools to manage risks. However, the nature of these missing or incomplete markets does not necessarily imply inefficiencies that would justify government intervention. Copyright 1997 Western Economic Association International.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 15 (1997)
Issue (Month): 3 (07)
Pages: 103-112

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Handle: RePEc:bla:coecpo:v:15:y:1997:i:3:p:103-112

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Cited by:
  1. Revoredo-Giha, C. & Zuppiroli, M., 2013. "Commodity futures markets: are they an effective price risk management tool for the European wheat supply chain ?," 2013 Second Congress, June 6-7, 2013, Parma, Italy, Italian Association of Agricultural and Applied Economics (AIEAA) 149773, Italian Association of Agricultural and Applied Economics (AIEAA).
  2. Carter, Colin A., 1999. "Commodity futures markets: a survey," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, Australian Agricultural and Resource Economics Society, vol. 43(2).
  3. Revoredo-Giha, Cesar & Zuppiroli, Marco, 2012. "Effectiveness of hedging within the high price volatility context," Working Papers, Scottish Agricultural College, Land Economy Research Group 142546, Scottish Agricultural College, Land Economy Research Group.
  4. Heidelbach, Olaf, 2007. "Efficiency of selected risk management instruments: An empirical analysis of risk reduction in Kazakhstani crop production," Studies on the Agricultural and Food Sector in Central and Eastern Europe, LeibĀ­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 40, number 92323.
  5. Jennifer Ifft, 2009. "Government vs Weather The True Story of Crop Insurance in India," Working Papers id:2268, eSocialSciences.
  6. Revoredo-Giha, Cesar & Leat, Philip M.K., 2008. "Collaborative supply chain initiatives as devices to cope with income variability in the Scottish red meat sector," Working Papers, Scottish Agricultural College, Land Economy Research Group 61105, Scottish Agricultural College, Land Economy Research Group.
  7. Tadesse, Dawit & Blank, Steven C., 2003. "Cultivar Diversity: A Neglected Risk Management Strategy," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 28(02), August.
  8. Chambers, Robert G., 2006. "Some Empirical Implications of State-Contingent Production Models," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia, Australian Agricultural and Resource Economics Society 137789, Australian Agricultural and Resource Economics Society.
  9. C. W. Morgan & A. J. Rayner & C. Vaillant, 1999. "Agricultural futures markets in LDCs: a policy response to price volatility?," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(6), pages 893-910.

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