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Do Income Support Programs Impact Producer Hedging Decisions? Evidence from a Cross-Country Comparative

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  • Andrea E. Woolverton
  • Michael E. Sykuta

Abstract

This article provides a unique perspective to why U.S. producers' hedging practices are not consistent with the price-risk management literature. We conduct a formal test of income support program impacts with survey data from South Africa and the United States, which have different producer income support policies. We find that producing in a supported environment (U.S.) decreases hedging for preplanting and preharvest expected yields by 30.39% and 20.03%, respectively. This study raises issues for further inquiry regarding both comparative agricultural lending practices and the relative costs of price-risk management tools. Copyright 2009 Agricultural and Applied Economics Association

Suggested Citation

  • Andrea E. Woolverton & Michael E. Sykuta, 2009. "Do Income Support Programs Impact Producer Hedging Decisions? Evidence from a Cross-Country Comparative," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(4), pages 834-852, December.
    • Handle: RePEc:oup:revage:v:31:y:2009:i:4:p:834-852
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    Cited by:

    1. Ricome, Aymeric & Chaib, Karim & Ridier, Aude & Kephaliacos, Charilaos & Carpy-Goulard, Francoise, 2012. "The role of cash crop marketing contracts in the adoption of low-input practices in the presence of risk and income supports," 126th Seminar, June 27-29, 2012, Capri, Italy 126222, European Association of Agricultural Economists.
    2. Carrer, Marcelo José & Silveira, Rodrigo Lanna F. & Meirelles De Souza Filho, Hildo, "undated". "Citrus Producers' Choice of Price Risk Management Tools," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258352, Agricultural and Applied Economics Association.
    3. 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.
    4. Huseynov, Samir & Taylor, Mykel R. & Martinez, Charles, 2022. "Farmers and Bakers: The role of Optimism Bias in Price Expectations," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322599, Agricultural and Applied Economics Association.
    5. Graupner, DL & Graupner, LI, 2023. "Testing a profit margin hedging model as a price risk management solution for crop farmers in South Africa," African Journal of Food, Agriculture, Nutrition and Development (AJFAND), African Journal of Food, Agriculture, Nutrition and Development (AJFAND), vol. 23(2), January.
    6. Ricome, Aymeric & Chaib, Karim & Ridier, Aude & Kephaliacos, Charilaos & Carpy-Goulard, Francoise, 2016. "The Role of Marketing Contracts in the Adoption of Low-Input Production Practices in the Presence of Income Supports: An Application in Southwestern France," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(3), pages 1-29.

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