Price expectations, risk aversion, and choice of sales methods for large‐scale farmers under incomplete market conditions

Peng Peng and Zhigang Xu

Agribusiness, 2022, vol. 38, issue 4, 1012-1031

Abstract: Large‐scale farmers' sales methods and prices are crucial for them to realize their production value. In this study, we consider conditions that involve incomplete insurance, futures, and product markets to construct a sales decision‐making analysis framework for large‐scale farmers and to reveal the influence mechanism of different sales methods. We empirically examine data from field surveys and subjective preference experiments involving 373 large‐scale grain farmers in four provinces in China. The results reveal that large‐scale farmers' ability to anticipate prices and their degree of risk aversion are important for their choices of sales methods because of the incomplete insurance, futures, and product markets in developing countries. Price expectations reflect farmers' judgments of future price trends. Therefore, large‐scale farmers who anticipate an increase in grain prices will choose to postpone grain sales to potentially maximize profits. The degree of risk aversion determines whether farmers will sell several times to avoid normalized price volatilities. Risk‐averse large‐scale farmers will choose a multiperiod sales method, while risk‐loving ones will choose a single‐period delayed sales method.

Date: 2022
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https://doi.org/10.1002/agr.21757

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Persistent link: https://EconPapers.repec.org/RePEc:wly:agribz:v:38:y:2022:i:4:p:1012-1031

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