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A Multi-Disciplinary Approach For Determining Adoption Of Agricultural Price Risk Management Strategies

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  • Jackson, Elizabeth
  • Quaddus, Mohammed
  • Islam, Nazrul
  • Stanton, John
  • Hoque, Zohurul
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    Abstract

    Australian wool producers have been slow to adopt price risk management strategies to stabilise the income from their wool sales. The highly volatile auction system accounts for 85% of raw wool sales while the remainder is sold by forward contract, futures and other hedging methods. Qualitative analysis was used to find behavioural factors associated with the adoption of price risk management strategies (specifically futures and forward contracts) for selling raw wool. Consideration was given to Diffusion of Innovations and the Theory of Planned Behaviour as theoretical frameworks in order to answer the research question: Are there any non-traditional behavioural factors that need to be incorporated into existing frameworks to determine adoption of price risk management strategies for selling raw wool? In contrast to these prominent theories, data from four focus groups conducted with wool producers in regional Western Australia showed that trust, habit and social cohesion were the major behavioural determinants that governed the adoption of price risk management strategies. The significance of this paper lies in its multi-disciplinary approach to understanding the dimensions of farm-level decision making.

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    Bibliographic Info

    Paper provided by Agricultural Economics Society in its series 81st Annual Conference, April 2-4, 2007, Reading University with number 7985.

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    Date of creation: 2007
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    Handle: RePEc:ags:aes007:7985

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    Keywords: Qualitative analysis; trust; habit; social cohesion; forward contracts; wool.; Agricultural Finance; Risk and Uncertainty;

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    1. Pannell, David J. & Malcolm, Bill & Kingwell, Ross S., 2000. "Are we risking too much? Perspectives on risk in farm modelling," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 23(1), June.
    2. repec:ltr:wpaper:1992.17 is not listed on IDEAS
    3. Bardsley, Peter, 1994. "The Collapse of the Australian Wool Reserve Price Scheme," Economic Journal, Royal Economic Society, vol. 104(426), pages 1087-1105, September.
    4. Pannell, David J. & Malcolm, Bill & Kingwell, Ross S., 2000. "Are we risking too much? Perspectives on risk in farm modelling," Agricultural Economics, Blackwell, vol. 23(1), pages 69-78, June.
    5. Zak, Paul J & Knack, Stephen, 2001. "Trust and Growth," Economic Journal, Royal Economic Society, vol. 111(470), pages 295-321, April.
    6. East, Robert, 1993. "Investment decisions and the theory of planned behaviour," Journal of Economic Psychology, Elsevier, vol. 14(2), pages 337-375, June.
    7. Fritz, Melanie & Hausen, Tobias, 2006. "Trust and Control Dynamics in Agrifood Supply Networks: Communication Strategies for Electronic Transaction Environments," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25509, International Association of Agricultural Economists.
    8. Joost M.E. Pennings & Raymond M. Leuthold, 2000. "The Role of Farmers' Behavioral Attitudes and Heterogeneity in Futures Contracts Usage," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 908-919.
    9. Wilson, Paul N. & Kennedy, Ana M., 1999. "Trustworthiness As An Economic Asset," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 2(02).
    10. Hodgson, Geoffrey M, 1997. "The Ubiquity of Habits and Rules," Cambridge Journal of Economics, Oxford University Press, vol. 21(6), pages 663-84, November.
    11. Fraser McLeay & Tony Zwart, 1998. "Factors affecting choice of cash sales versus forward marketing contracts," Agribusiness, John Wiley & Sons, Ltd., vol. 14(4), pages 299-309.
    12. Tutkun, Aysel & Lehmann, Bernard & Schmidt, Peter, 2006. "Explaining the Conversion to Organic Farming of Farmers of the Obwalden Canton, Switzerland - Extension of the Theory of Planned Behavior within a Structural Equation Modeling Approach," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25313, International Association of Agricultural Economists.
    13. Fraser, Rob W., 1997. "Seasonal variability, land values and willingness-to-pay for a forward wheat contract with protein premiums and discounts," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(2), June.
    14. Pluske, Johanna M. & Fraser, Rob W., 1995. "Can Producers Place Valid and Reliable Valuations on Wool Price-Risk Information?," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 63(02), August.
    15. Murray-Prior, Roy B. & Wright, Vic, 2004. "Use of strategies and decision rules by Australian wool producers to manage uncertainty," AFBM Journal, Australasian Farm Business Management Network, vol. 1.
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