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The Role of Information in Shaping Pre-Harvest Hedging Decisions in Grain Marketing

Author

Listed:
  • Eronmwon, Iyore
  • Walters, Cory
  • Yiannaka, Amalia
  • Banerjee, Simanti

Abstract

Hedging is a critical risk management tool in grain marketing, allowing producers to mitigate price uncertainty. Understanding the factors that influence hedging decisions is essential for developing effective marketing strategies and improving decision-making under risk. This study examined the impact of information on decision-making in a pre-harvest grain marketing context. Specifically, we employed both laboratory and framed field experiments to investigate how information about expected production costs and price evolution - including both current and historical trends - affects marketing behavior. The results indicate that providing participants with both expected cost and price evolution information significantly increased the quantity of grain hedged before harvest. Furthermore, participants hedged more grain when crop insurance was available, suggesting that insurance is viewed as a complement to hedging rather than a substitute.

Suggested Citation

  • Eronmwon, Iyore & Walters, Cory & Yiannaka, Amalia & Banerjee, Simanti, 2025. "The Role of Information in Shaping Pre-Harvest Hedging Decisions in Grain Marketing," 2025 AAEA & WAEA Joint Annual Meeting, July 27-29, 2025, Denver, CO 360703, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea25:360703
    DOI: 10.22004/ag.econ.360703
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    References listed on IDEAS

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    3. Zulauf, Carl R. & Larson, Donald W. & Alexander, Christopher K. & Irwin, Scott H., 2001. "Pre-Harvest Pricing Strategies In Ohio Corn Markets: Their Effect On Returns And Cash Flow," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 33(01), pages 1-13, April.
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