The efficacy of a forward market for the agricultural sector in mitigating climate risk: A potential alternative to agricultural subsidies?

Qiuying Nan, Mengchan Sun, Jiajia Nie, Rui Yang and Lijuan Wan

Finance Research Letters, 2023, vol. 55, issue PB

Abstract: This study evaluates the viability of forward markets as an alternative to agricultural subsidy policies under climate risks. We assessed the impact of three distinct strategies, cost subsidy, minimum price subsidy, and forward contracts on farmers, consumers, and society. The findings reveal that cost subsidies generate superior advantages for farmers and society when crop yield uncertainty is minimal. Conversely, farmers accrue greater benefits by leveraging forward contracts instead of relying on government subsidies. These results underscore the need for policymakers to design subsidy policies tailored to specific agricultural contexts to ensure optimal benefits for all stakeholders.

Keywords: Agricultural subsidy; Public policy; Forward market; Yield uncertainty; Climate risks (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:55:y:2023:i:pb:s1544612323003719

DOI: 10.1016/j.frl.2023.103999

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