Advanced Search
MyIDEAS: Login to save this article or follow this journal

Feasibility of a cash forward contract: An application to the French and Spanish potato sectors

Contents:

Author Info

  • Mar�a Bielza

    (Joint Research Center, European Commission, Ispra, Italy)

  • Alberto Garrido

    (Department of Agricultural Economics and Social Sciences, Technical University of Madrid, Madrid, Spain)

  • José M. Sumpsi

    (Department of Agricultural Economics and Social Sciences, Technical University of Madrid, Madrid, Spain)

Registered author(s):

    Abstract

    This study examines a cash forward contract (CFC) that a growers' cooperative or association may offer producers to lock in a fixed price for their output. To cover the forward contract's risks, the cooperative would set up a stabilization fund, and as an option, may hedge with futures contracts. The authors evaluate both strategies' costs, which would be charged to the growers signing in the CFC in the form of a fee. By comparing this fee with farmers' willingness to pay, it is determined whether growers' would be interested in the forward contract. The scheme is tested on a selection of Spanish and French potato varieties, with reference to the “April” futures contracts traded on the Amsterdam exchange. The authors conclude that hedging with futures may help to reduce the cooperative's exposure to financial risk, but, on average, the stabilization fund alone is more effective without hedging. Risk-averse growers may be interested in CFCs to reduce their revenue instability. [JEL Classifications: Q13, Q14, G13] © 2007 Wiley Periodicals, Inc. Agribusiness 23: 245-261, 2007.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://hdl.handle.net/10.1002/agr.20118
    File Function: Link to full text; subscription required
    Download Restriction: no

    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

    Volume (Year): 23 (2007)
    Issue (Month): 2 ()
    Pages: 245-261

    as in new window
    Handle: RePEc:wly:agribz:v:23:y:2007:i:2:p:245-261

    Contact details of provider:
    Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Elam, Emmett W., 1992. "Cash Forward Contracting Versus Hedging Of Fed Cattle, And The Impact Of Cash Contracting On Cash Prices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), July.
    2. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
    3. Hueth, Brent & Hennessy, David A., 2002. "Contracts and Risk in Agriculture: Conceptual and Empirical Foundations," Staff General Research Papers 5324, Iowa State University, Department of Economics.
    4. Moschini, Giancarlo & Lapan, Harvey, 1995. "The Hedging Role of Options and Futures under Joint Price, Basis, and Production Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 1025-49, November.
    5. W. Erno Kuiper & Joost M. E. Pennings, 2002. "Identification by full adjustment: evidence from the relationship between futures and spot prices," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(1), pages 67-84, March.
    6. Barry T. Coyle, 1999. "Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 553-567.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, vol. 40(C), pages 14-24.
    2. Robert Finger & Nadja El Benni, 2012. "A Note on Price Risks in Swiss Crop Production – Empirical Results and Comparisons with other Countries," Yearbook of Socioeconomics in Agriculture, Swiss Society for Agricultural Economics and Rural Sociology, vol. 5(1), pages 131-151.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wly:agribz:v:23:y:2007:i:2:p:245-261. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.