IDEAS home Printed from https://ideas.repec.org/a/ags/agreko/49163.html
   My bibliography  Save this article

Is geographic diversification sufficient to limit contract grower risk?

Author

Listed:
  • Geyser, Mariette
  • Louw, Andre
  • Botha, L.

Abstract

Lending and financial institutions have looked for a variety of ways to expand their portfolios into agriculture, but because of the risks associated with lending to farmers who lack traditional forms of collateral, they face price and yield risks, causing these inroads to be limited. Market-based instruments are readily available for price risk. Organised exchanges offering the most basic of these instruments, futures and options, have operated for a long time, providing transparency to the market and low-cost risk transfer tools for those able to access them. While the use of price risk management instruments is an incomplete solution, it has sufficient merits on its own and will make the overall burden of risk more bearable. The use of these instruments and multi-peril crop insurance products is expensive and does not provide full protection for financial lending institutions to limit their credit risk exposure. This article determines whether geographic diversification would be sufficient as a risk management tool for lending institutions to limit their credit risk.

Suggested Citation

  • Geyser, Mariette & Louw, Andre & Botha, L., 2009. "Is geographic diversification sufficient to limit contract grower risk?," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 48(1), pages 1-14, March.
    • Handle: RePEc:ags:agreko:49163
    DOI: 10.22004/ag.econ.49163
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/49163/files/3.%20Geyser%20et%20al.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.49163?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Nelson, R. A. & Holzworth, D. P. & Hammer, G. L. & Hayman, P. T., 2002. "Infusing the use of seasonal climate forecasting into crop management practice in North East Australia using discussion support software," Agricultural Systems, Elsevier, vol. 74(3), pages 393-414, December.
    2. Hansen, James W., 2002. "Realizing the potential benefits of climate prediction to agriculture: issues, approaches, challenges," Agricultural Systems, Elsevier, vol. 74(3), pages 309-330, December.
    3. Podesta, Guillermo & Letson, David & Messina, Carlos & Royce, Fred & Ferreyra, R. Andres & Jones, James & Hansen, James & Llovet, Ignacio & Grondona, Martin & O'Brien, James J., 2002. "Use of ENSO-related climate information in agricultural decision making in Argentina: a pilot experience," Agricultural Systems, Elsevier, vol. 74(3), pages 371-392, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carla Roncoli & Christine Jost & Paul Kirshen & Moussa Sanon & Keith Ingram & Mark Woodin & Léopold Somé & Frédéric Ouattara & Bienvenue Sanfo & Ciriaque Sia & Pascal Yaka & Gerrit Hoogenboom, 2009. "From accessing to assessing forecasts: an end-to-end study of participatory climate forecast dissemination in Burkina Faso (West Africa)," Climatic Change, Springer, vol. 92(3), pages 433-460, February.
    2. Cabrera, Victor E. & Letson, David & Podesta, Guillermo, 2007. "The value of climate information when farm programs matter," Agricultural Systems, Elsevier, vol. 93(1-3), pages 25-42, March.
    3. Hansen, James W., 2002. "Realizing the potential benefits of climate prediction to agriculture: issues, approaches, challenges," Agricultural Systems, Elsevier, vol. 74(3), pages 309-330, December.
    4. Nidumolu, U.B. & Lubbers, M. & Kanellopoulos, A. & van Ittersum, M.K. & Kadiyala, D.M. & Sreenivas, G., 2016. "Engaging farmers on climate risk through targeted integration of bio-economic modelling and seasonal climate forecasts," Agricultural Systems, Elsevier, vol. 149(C), pages 175-184.
    5. World Bank, 2010. "Improving Water Management in Rainfed Agriculture : Issues and Options in Water-Constrained Production Systems," World Bank Publications - Reports 13028, The World Bank Group.
    6. Bert, Federico E. & Satorre, Emilio H. & Toranzo, Fernando Ruiz & Podesta, Guillermo P., 2006. "Climatic information and decision-making in maize crop production systems of the Argentinean Pampas," Agricultural Systems, Elsevier, vol. 88(2-3), pages 180-204, June.
    7. Cao, Juan & Zhang, Zhao & Tao, Fulu & Chen, Yi & Luo, Xiangzhong & Xie, Jun, 2023. "Forecasting global crop yields based on El Nino Southern Oscillation early signals," Agricultural Systems, Elsevier, vol. 205(C).
    8. Jesse B. Tack & David Ubilava, 2015. "Climate and agricultural risk: measuring the effect of ENSO on U.S. crop insurance," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 245-257, March.
    9. de Guzman, Rosalina G. & Hilario, Flaviana & Ortega, Daisy & Hayman, Peter & Alexander, Bronya, 2010. "El Nino Southern Oscillation in the Philippines: Impacts, Forecasts, and Risk Management," Philippine Journal of Development PJD 2009 Vol. XXXVI No. 1, Philippine Institute for Development Studies.
    10. Alexis Berg & Benjamin Sultan & Nathalie Noblet-Ducoudré, 2011. "Including tropical croplands in a terrestrial biosphere model: application to West Africa," Climatic Change, Springer, vol. 104(3), pages 755-782, February.
    11. Moojen, Fernanda Gomes & Ryschawy, Julie & dos Santos, Davi Teixeira & Barth Neto, Armindo & Vieira, Paulo Cardozo & Portella, Elisa & de Faccio Carvalho, Paulo César, 2022. "The farm coaching experience to support the transition to integrated crop–livestock systems: From gaming to action," Agricultural Systems, Elsevier, vol. 196(C).
    12. Huang, Kaixing & Wang, Jinxia & Huang, Jikun & Findlay, Christopher, 2018. "The potential benefits of agricultural adaptation to warming in China in the long run," Environment and Development Economics, Cambridge University Press, vol. 23(2), pages 139-160, April.
    13. Basharat Ali & Peter Dahlhaus, 2022. "Roles of Selective Agriculture Practices in Sustainable Agricultural Performance: A Systematic Review," Sustainability, MDPI, vol. 14(6), pages 1-15, March.
    14. Nadolnyak, Denis A. & Novak, James L. & Vedenov, Dmitry V. & Paz, Joel O. & Fraisse, Clyde W. & Hoogenboom, Gerrit, 2007. "Non-Parametric Analysis of ENSO Impacts on Yield Distributions: Implications for GRP Contract Design," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34858, Southern Agricultural Economics Association.
    15. Gadgil, Sulochana & Seshagiri Rao, P. R. & Narahari Rao, K., 2002. "Use of climate information for farm-level decision making: rainfed groundnut in southern India," Agricultural Systems, Elsevier, vol. 74(3), pages 431-457, December.
    16. Davey, Michael & Brookshaw, Anca, 2011. "Long-range meteorological forecasting and links to agricultural applications," Food Policy, Elsevier, vol. 36(S1), pages 88-93.
    17. Nicolas R. Dalezios & Nicholas Dercas & Nicos V. Spyropoulos & Emmanouil Psomiadis, 2019. "Remotely Sensed Methodologies for Crop Water Availability and Requirements in Precision Farming of Vulnerable Agriculture," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 33(4), pages 1499-1519, March.
    18. Le Gal, P.-Y. & Dugué, P. & Faure, G. & Novak, S., 2011. "How does research address the design of innovative agricultural production systems at the farm level? A review," Agricultural Systems, Elsevier, vol. 104(9), pages 714-728.
    19. Farid AitSahlia & Chung-Jui Wang & Victor Cabrera & Stan Uryasev & Clyde Fraisse, 2011. "Optimal crop planting schedules and financial hedging strategies under ENSO-based climate forecasts," Annals of Operations Research, Springer, vol. 190(1), pages 201-220, October.
    20. Osgood, Daniel E. & Suarez, Pablo & Hansen, James & Carriquiry, Miguel & Mishra, Ashok, 2008. "Integrating seasonal forecasts and insurance for adaptation among subsistence farmers : the case of Malawi," Policy Research Working Paper Series 4651, The World Bank.

    More about this item

    Keywords

    Agricultural Finance;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:agreko:49163. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aeasaea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.