Marketing contract choices in agriculture: The role of price expectation and price risk management

Arnaud Reynaud and Aymeric Ricome ()
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Arnaud Reynaud: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse
Aymeric Ricome: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We identify factors involved in the decision of farmers to use marketing contracts (pool, storage and forward contracts), and we explicitly account for the hedging and price-enhancement components of this decision. Using panel corner solution models (Tobit and double-hurdle) to represent farmers' contracting decision using a sample of French cereal producers, we find that both the hedging and the price-enhancement motives are important factors driving marketing choices. When risk aversion or exposure to price risk rises, the price-enhancement motive becomes less influential. Farmers appear to be more reluctant to base their marketing decisions on their price expectations in that case.

Keywords: Hedging; Storage; Marketing contracts; Risk management; Risk perception (search for similar items in EconPapers)
Date: 2022-03
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Citations: View citations in EconPapers (3)

Published in Agricultural Economics, 2022, 53 (1), pp.170-186. ⟨10.1111/agec.12675⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03602696

DOI: 10.1111/agec.12675

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