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Potentials for Substituting Farmers' Use of Futures and Options for Farm Programs

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  • Heifner, Richard G.
  • Wright, Bruce H.

Abstract

By using commodity futures, options, or cash forward contracts, farmers can broaden their pricing alternatives and partly protect themselves against price declines within a given year, but they cannot effectively stabilize their incomes across years. Each of these types of contracts sets a price or a price limit for a commodity to be delivered at a later date; futures and options contracts are standardized and traded on exchanges; a commodity option gives the holder the right to buy or sell a futures contract at a specified price during a designated time interval. Government programs to expand use of such contracts by farmers generally would not raise or stabilize market prices or farmers' incomes unless subsidies were involved. Such subsidies would be difficult to administer and offer few advantages over conventional farm programs.

Suggested Citation

  • Heifner, Richard G. & Wright, Bruce H., 1989. "Potentials for Substituting Farmers' Use of Futures and Options for Farm Programs," Agricultural Economic Reports 308136, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerser:308136
    DOI: 10.22004/ag.econ.308136
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    References listed on IDEAS

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    Cited by:

    1. Ashok Mishra & Barry Goodwin, 2006. "Revenue insurance purchase decisions of farmers," Applied Economics, Taylor & Francis Journals, vol. 38(2), pages 149-159.
    2. Jha, Shikha & Srinivasan, P. V., 1999. "Grain price stabilization in India: Evaluation of policy alternatives," Agricultural Economics, Blackwell, vol. 21(1), pages 93-108, August.
    3. Heifner, Richard G. & Glauber, Joseph W. & Miranda, Mario J. & Plato, Gerald E. & Wright, Bruce H., 1990. "Futures, Options, and Farm Programs: Report to Congress on a Study Mandated by the Food Security Act of 1985," Staff Reports 278261, United States Department of Agriculture, Economic Research Service.

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