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A mixed-method approach for determining the risk and complexity farmers associate with using forward contracts

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Author Info
Jackson, Elizabeth
Quaddus, Mohammed
Islam, Nazrul
Stanton, John
Abstract

This paper reports on a model that was developed to understand the behavioural determinants surrounding farmers’ adoption of forward contracts for agricultural commodities. Based on the Theory of Planned Behaviour and Diffusion of Innovations, 28 hypotheses within the model were written and then tested via a telephone survey that gathered 305 responses from Western Australian wool producers. The data from the telephone survey were analysed using SPSS 14 and the Partial Least Squares approach to Structural Equation Modelling. Most relationships within the model could be explained after rigorous quantitative analysis, however, further explanation was required to understand two final aspects of adoption behaviour: firstly, the sources of risk wool producers perceive about using forward contracts and, secondly, why ‘complexity’, which is normally a limiting factor to adoption, was not significant in the context of using forward contracts to sell wool. Qualitative case studies of four Western Australian wool producers were conducted to fill these gaps. Key findings from the case studies were that profit-raising, the whole farm system as basis for decision making, the mass media and social pressures are important behavioural factors that are limiting the adoption of forward contracts by Australian wool producers.

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Paper provided by Agricultural Economics Society in its series 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK with number 42305.

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Date of creation: 31 Mar 2008
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Handle: RePEc:ags:aes008:42305

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Related research
Keywords: Risk; complexity; forward contracts; structural equation modelling; partial least squares; Risk and Uncertainty; Q120; Q130;

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  1. Pluske, Johanna & Fraser, Rob, 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. [Downloadable!]
  2. 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. [Downloadable!] (restricted)
  3. Batz, F. -J. & Peters, K. J. & Janssen, W., 1999. "The influence of technology characteristics on the rate and speed of adoption," Agricultural Economics, Blackwell, vol. 21(2), pages 121-130, October. [Downloadable!] (restricted)
  4. Miller, Stephen E., 1986. "Forward Contracting Versus Hedging Under Price And Yield Uncertainty," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 18(02), December. [Downloadable!]
  5. Amir K. Abadi Ghadim & David J. Pannell & Michael P. Burton, 2005. "Risk, uncertainty, and learning in adoption of a crop innovation," Agricultural Economics, International Association of Agricultural Economists, vol. 33(1), pages 1-9, 07. [Downloadable!] (restricted)
  6. Lynne, Gary D. & Franklin Casey, C. & Hodges, Alan & Rahmani, Mohammed, 1995. "Conservation technology adoption decisions and the theory of planned behavior," Journal of Economic Psychology, Elsevier, vol. 16(4), pages 581-598, December. [Downloadable!] (restricted)
  7. Dent, J. B. & Edwards-Jones, G. & McGregor, M. J., 1995. "Simulation of ecological, social and economic factors in agricultural systems," Agricultural Systems, Elsevier, vol. 49(4), pages 337-351. [Downloadable!] (restricted)
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