IDEAS home Printed from https://ideas.repec.org/a/cup/jagaec/v46y2014i04p527-541_02.html
   My bibliography  Save this article

Adoption of Milk and Feed Forward Pricing Methods by Dairy Farmers

Author

Listed:
  • Wolf, Christopher A.
  • Widmar, Nicole J. Olynk

Abstract

Increasing volatility in milk and feed prices has led to higher levels of market and financial risk for dairy farmers. We examine dairy farmer use of forward pricing methods for milk sales and feed purchases. Operators with larger herds, higher levels of education, and those farm businesses that were not organized as sole proprietorships were more likely to have used forward pricing. We also examine reasons dairy farm operators had not used these tools to date and find that the most common reason was lack of knowledge. These findings may be used to target educational seminars and outreach to dairy farm managers.

Suggested Citation

  • Wolf, Christopher A. & Widmar, Nicole J. Olynk, 2014. "Adoption of Milk and Feed Forward Pricing Methods by Dairy Farmers," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 46(4), pages 527-541, November.
    • Handle: RePEc:cup:jagaec:v:46:y:2014:i:04:p:527-541_02
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S1074070800029084/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bosch, Darrell J. & Johnson, Christian J., 1992. "An Evaluation of Risk Management Strategies for Dairy Farms," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 24(2), pages 173-182, December.
    2. Neyhard, James & Tauer, Loren & Gloy, Brent, 2013. "Analysis of Price Risk Management Strategies in Dairy Farming Using Whole-Farm Simulations," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 45(2), pages 313-327, May.
    3. Hayley H. Chouinard & David E. Davis & Jeffrey T. LaFrance & Jeffrey M. Perloff, 2010. "Milk Marketing Order Winners and Losers," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 59-76.
    4. Ani L. Katchova & Mario J. Miranda, 2004. "Two-Step Econometric Estimation of Farm Characteristics Affecting Marketing Contract Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 88-102.
    5. Tomek, William G., 1987. "Effects of Futures and Options Trading on Farm Incomes," Staff Papers 186718, Cornell University, Department of Applied Economics and Management.
    6. repec:cup:jagaec:v:40:y:2008:i:1:p:203-222_1 is not listed on IDEAS
    7. Barry K. Goodwin & Ted C. Schroeder, 1994. "Human Capital, Producer Education Programs, and the Adoption of Forward-Pricing Methods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(4), pages 936-947.
    8. Christopher A. Wolf & J. Roy Black & Joleen C. Hadrich, 2009. "Upper Midwest dairy farm revenue variation and insurance implications," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 69(3), pages 346-358, November.
    9. Bozic, Marin & Newton, John & Thraen, Cameron S. & Gould, Brian W., 2012. "Mean-reversion in Income over Feed Cost Margins:Evidence and Implications for Managing Margin Risk by U.S. Dairy Producers," Staff Papers 132379, University of Minnesota, Department of Applied Economics.
    10. Paudel, Krishna P. & Gauthier, Wayne M. & Westra, John V. & Hall, Larry M., 2008. "Factors Influencing and Steps Leading to the Adoption of Best Management Practices by Louisiana Dairy Farmers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(1), pages 1-20, April.
    11. 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

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


    Cited by:

    1. Bolotova, Yuliya V., 2022. "Teaching Forward Contracts in Undergraduate Courses in Agribusiness and Agricultural Economics Programs," Applied Economics Teaching Resources (AETR), Agricultural and Applied Economics Association, vol. 4(4), September.
    2. Fernandez-Perez, Adrian & Frijns, Bart & Gafiatullina, Ilnara & Tourani-Rad, Alireza, 2022. "Profit margin hedging in the New Zealand dairy farming industry," Journal of Commodity Markets, Elsevier, vol. 26(C).
    3. Pardeshi, Shefali & Loughrey, Jason & O’Connor, Declan, 2024. "Farm Investment and Adoption of Fixed Milk Price Contracts on Irish Dairy Farms," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344291, International Association of Agricultural Economists (IAAE).
    4. Loughrey, J. & Thorne, F. & Kinsella, A. & Hennessy, T. & O'Donoghue, C. & Vollenweider, X., 2015. "Market risk management and the demand for forward contracts among Irish dairy farmers," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 4(4), July.
    5. MacDonald, James M. & Cessna, Jerry & Mosheim, Roberto, 2016. "Changing Structure, Financial Risks, and Government Policy for the U.S. Dairy Industry," Economic Research Report 262200, United States Department of Agriculture, Economic Research Service.
    6. Charlebois, Sylvain, 2016. "Policy-change Triggered Environmental Uncertainty in a Dairy Cooperative: The Case of Mila in South Tyrol," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 7(3), pages 1-13, July.

    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. Feil, J.-H. & Anastassiadis, F. & Mußhoff, O. & Schilling, P., 2015. "Analysing Farmers’ Use of Price Hedging Instruments: An Experimental Approach," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 50, March.
    2. 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. 46(4), pages 1-18, December.
    3. 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. 47(1), pages 1-14, March.
    4. Fernandez-Perez, Adrian & Frijns, Bart & Gafiatullina, Ilnara & Tourani-Rad, Alireza, 2022. "Profit margin hedging in the New Zealand dairy farming industry," Journal of Commodity Markets, Elsevier, vol. 26(C).
    5. Ueckermann, E.M. & Blignaut, J.N. & Gupta, Rangan & Raubenheimer, J., 2008. "Modelling South African grain farmers’ preferences to adopt derivative contracts using discrete choice models," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(2), pages 1-18, June.
    6. Franken, Jason R.V. & Pennings, Joost M.E., 2009. "What Drives How Much Crop Producers Sell in Spot, Forward, and Futures Markets?," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49237, Agricultural and Applied Economics Association.
    7. Wesley N. Musser & George F. Patrick & David T. Eckman, 1996. "Risk and Grain Marketing Behavior of Large-Scale Farmers," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 18(1), pages 65-77.
    8. Jason R.V. Franken & Joost M.E. Pennings & Philip Garcia, 2014. "Measuring the effect of risk attitude on marketing behavior," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 525-535, September.
    9. Carrer, Marcelo José & Silveira, Rodrigo Lanna F. & Meirelles De Souza Filho, Hildo, 2017. "Citrus Producers' Choice of Price Risk Management Tools," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258352, Agricultural and Applied Economics Association.
    10. Caroline Roussy & Aude Ridier & Karim Chaib & Marie Boyet, 2018. "Marketing contracts and risk management for cereal producers," Agribusiness, John Wiley & Sons, Ltd., vol. 34(3), pages 616-630, June.
    11. Bignebat, C., 2018. "Learning process in marketing contract choice: the case of cereals in the Paris Basin," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277233, International Association of Agricultural Economists.
    12. Frasa, Stefanie & Carlberg, Jared & Hogan, Robert, 2015. "Use of Contracts by Prairie Agricultural Producers," Working Papers 232328, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    13. Roussy, Caroline & Rider, Aude & Chaib, Karim & Boyet, Marie, 2017. "Marketing Contracts and Risk Management for Cereal Producers," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261106, European Association of Agricultural Economists.
    14. Williams, John & Malcolm, Bill, 2012. "Farmer decisions about selling wheat and managing wheat price risk in Australia," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 20, pages 1-10.
    15. Pennings, Joost M.E. & Garcia, Philip & Irwin, Scott H. & Good, Darrel L., 2003. "How To Group Market Participants? Heterogeneity In Hedging Behavior," 2003 Annual meeting, July 27-30, Montreal, Canada 21963, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. Aymeric Ricome & Arnaud Reynaud, 2022. "Marketing contract choices in agriculture: The role of price expectation and price risk management," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 170-186, January.
    17. Yang, Xi & Miao, Ruiqing & Khanna, Madhu, 2014. "Contracting in the Presence of Insurance: The Case of Bioenergy Crop Production," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170188, Agricultural and Applied Economics Association.
    18. Viet Hoang & Vinh Nguyen, 2023. "Determinants of small farmers' participation in contract farming in developing countries: A study in Vietnam," Agribusiness, John Wiley & Sons, Ltd., vol. 39(3), pages 836-853, July.
    19. Vassalos, Michael & Li, Yingbo, 2016. "Assessing the Impact of Fresh Vegetable Growers’ Risk Aversion Levels and Risk Preferences on the Probability of Adopting Marketing Contracts: A Bayesian Approach," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(1), pages 1-18, February.
    20. Shi Zheng & Pei Xu & Zhigang Wang, 2011. "Factors affecting Chinese enterprises' hedging decision making," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 3(4), pages 476-488, November.

    More about this item

    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:cup:jagaec:v:46:y:2014:i:04:p:527-541_02. 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: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/aae .

    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.