IDEAS home Printed from https://ideas.repec.org/a/ags/sojoae/30369.html
   My bibliography  Save this article

Why Do Farmers Forward Contract In Factor Markets?

Author

Listed:
  • Haydu, John J.
  • Myers, Robert J.
  • Thompson, Stanley R.

Abstract

This study investigated farmers' incentives to forward purchase inputs. A model of farmer decision making was used to derive an optimal forward contracting rule. Explicit in the model was the tradeoff between the quantity of input to be purchased in advance, and the remaining portion to be purchased later on the spot market. Results indicated that the primary reasons farmers contract inputs are to reduce risk and to speculate on favorable price moves. A numerical example of fertilizer used in corn production indicated that the size of the price discount was the dominant factor in forward contracting decisions.

Suggested Citation

  • Haydu, John J. & Myers, Robert J. & Thompson, Stanley R., 1992. "Why Do Farmers Forward Contract In Factor Markets?," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 0(Number 1), pages 1-7, July.
  • Handle: RePEc:ags:sojoae:30369
    as

    Download full text from publisher

    File URL: http://ageconsearch.umn.edu/record/30369/files/24010145.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Friend, Irwin & Blume, Marshall E, 1975. "The Demand for Risky Assets," American Economic Review, American Economic Association, vol. 65(5), pages 900-922, December.
    2. Chavas, Jean-Paul & Pope, Rulon D., 1982. "Hedging And Production Decisions Under A Linear Mean-Variance Preference Function," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 0(Number 1), pages 1-12, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Timothy Park & Ashok K. Mishra & Shawn J. Wozniak, 2014. "Do farm operators benefit from direct to consumer marketing strategies?," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 213-224, March.
    2. Todd H. Kuethe & Mitch Morehart, 2012. "The profit impacts of risk management tool adoption," Agricultural Finance Review, Emerald Group Publishing, vol. 72(1), pages 104-116, May.
    3. Perry, Janet E. & Mishra, Ashok K., 1999. "Forward Contracting Of Inputs: A Farm-Level Analysis," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 0(Number 2), pages 1-15.
    4. Daberkow, Stan G. & McBride, William D., 2004. "Corn Producers┬┤ Response To The 2001 Nitrogen Fertilizer Price Increase," 2004 Annual meeting, August 1-4, Denver, CO 20271, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Keywords

    Farm Management;

    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:sojoae:30369. See general information about how to correct material in RePEc.

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

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.