Impact of government programs on producer demand for hedging

William Maples, Anil K. Giri, Keith Coble and Dipak Subedi

Applied Economic Perspectives and Policy, 2022, vol. 44, issue 3, 1126-1138

Abstract: This paper evaluates producer risk management decisions accounting for government provided risk management programs. An analytical model is developed to investigate the effect of crop insurance and Farm Bill program choice on producer demand for hedging in the futures market. Simulation results show government programs has potential to alter the optimal hedging decisions of producers. Yield protection insurance is found to complement hedging in most locations, while revenue insurance is generally found to substitute for hedging. Farm Bill programs are found to have varying effects based on price level.

Date: 2022
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https://doi.org/10.1002/aepp.13241

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Persistent link: https://EconPapers.repec.org/RePEc:wly:apecpp:v:44:y:2022:i:3:p:1126-1138

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