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Forward Pricing Behavior of Corn and Soybean Producers

Author

Listed:
  • Davis, Todd D.
  • Patrick, George F.
  • Coble, Keith H.
  • Knight, Thomas O.
  • Baquet, Alan E.

Abstract

Forward pricing behavior of random samples of Indiana, Nebraska, and Mississippi crop producers was analyzed using Heckman’s two-step limited information maximum likelihood estimation procedure. Producers who forward priced during the 1995-1998 period generally expected to forward price in 1999 using similar techniques. Probit models were estimated for cash forward contracts and taking a direct position in futures or options separately and combined. Results provide limited support for the hypothesis that forward pricing should be analyzed as an adoption decision. Variables reflecting risk attitudes do affect the decision to use forward pricing, while variables to economic position affect the level of forward pricing.

Suggested Citation

  • Davis, Todd D. & Patrick, George F. & Coble, Keith H. & Knight, Thomas O. & Baquet, Alan E., 2005. "Forward Pricing Behavior of Corn and Soybean Producers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 0(Number 1), pages 1-16, April.
  • Handle: RePEc:ags:joaaec:43722
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    File URL: http://ageconsearch.umn.edu/record/43722/files/145-160.pdf
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    References listed on IDEAS

    as
    1. Park, Timothy A. & Florkowski, Wojciech J., 1999. "Demand and Quality Uncertainty in Pecan Purchasing Decisions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 31(01), pages 29-39, April.
    2. Townsend, John P. & Brorsen, B. Wade, 2000. "Cost Of Forward Contracting Hard Red Winter Wheat," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(01), April.
    3. Brorsen, B. Wade & Anderson, Kim B., 1994. "Cash Wheat Marketing: Strategies for Real People," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 0(Number 2), pages 1-10.
    4. repec:ags:joaaec:v:32:y:2000:i:1:p:89-94 is not listed on IDEAS
    5. B.I. Shapiro & B. Wade Brorsen, 1988. "Factors Affecting Farmers' Hedging Decisions," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 145-153.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jacobs, Keri & Li, Ziran & Hayes, Dermot, 2016. "Price responses in forward contracting: do we limit the upside and expose the downside?," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235539, Agricultural and Applied Economics Association.
    2. Mofokeng, Maine & Vink, Nick, 2013. "Factors Affecting the Hedging Decision of Maize Farmers in Gauteng Province," 2013 AAAE Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161465, African Association of Agricultural Economists (AAAE).
    3. Rejesus, Roderick M. & Knight, Thomas O. & Jaramillo, Mauricio & Coble, Keith H. & Patrick, George F. & Baquet, Alan E., 2008. "Preference for Risk Management Information Sources: Implications for Extension and Outreach Programming," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(1), April.
    4. Raza Ullah & Ganesh P. Shivakoti & Asif Kamran & Farhad Zulfiqar, 2016. "Farmers versus nature: managing disaster risks at farm level," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 82(3), pages 1931-1945, July.
    5. Jordaan, Henry & Grove, Bennie, 2008. "Factors affecting the use of forward pricing methods in price risk management with special reference to the influence of risk aversion," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 0(Issue 1), pages 1-14, March.
    6. Jordaan, Henry & Grove, Bennie, 2007. "Factors Affecting Maize Producers Adoption of Forward Pricing in Price Risk Management: The Case of Vaalharts," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 0(Issue 4), pages 1-18, December.

    More about this item

    Keywords

    Crop Production/Industries; Marketing; Production Economics;

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