Do Futures Benefit Farmers?
AbstractSimulations are used to analyze welfare and market- and farm-level effects of making futures available to producers of a storable commodity. Key features of the model are the explicit consideration of dynamic impacts due to inventories, and of aggregate market effects associated with futures adoption by some producers. Application to the natural rubber market shows that futures availability can lead to sizeable market- and farm-level effects. Futures availability enhances consumer welfare, reduces non-adopter welfare, and yields important welfare gains for adopters when their market share is small and welfare losses when they account for a sufficiently large market share.
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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 12919.
Date of creation: 19 Apr 2008
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, February 2009, vol. 91 no. 1, pp. 154-167
Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
More information through EDIRC
Commodity markets; futures; natural rubber; rational expectations; storage model; welfare analysis;
Other versions of this item:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
This paper has been announced in the following NEP Reports:
- NEP-AGR-2008-05-17 (Agricultural Economics)
- NEP-ALL-2008-05-17 (All new papers)
- NEP-FMK-2008-05-17 (Financial Markets)
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