Have Farmers and Ranchers Lost Confidence in Futures Markets?
Agricultural producers have used futures markets to manage price risk, confident that 1) cash and futures prices move together over time, 2) cash and futures prices converge as the contract approaches expiration, and 3) funds held in margin accounts as a performance bond were secure in segregated accounts at the brokerage firm. However, recent price and basis volatility, coupled with the financial events surrounding MF Global and Peregrine may have shaken some growers’ perceptions of the risks of hedging with futures and options. In order to assess the degree to which these circumstances in the futures markets have impacted the risk management strategies of agricultural producers, we surveyed the 1,015 graduates of the Texas A&M AgriLife Master Marketer program. This group represents a sample of farmers and ranchers, merchandisers, and lenders with training and experience in using futures and options for hedging. Besides collecting information on their current risk management practices, we measured respondent views on the importance of key new sources of risk. On a 1 to 7 Likert scale with 1=disagree, 7=agree, and 4=neutral, respondents indicated some agreement (4.87) that futures price volatility and margins are a serious impediment to using futures and options. Respondents were neutral (4.06) on margin account security as a serious impediment to futures and options. The questions touched a nerve with some farmers, as noted in the comments.
|Date of creation:||18 Jan 2013|
|Contact details of provider:|| Web page: http://www.saea.org/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:saea13:142998. 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)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.