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A Risk-Programming Analysis of Forward Contracting with Credit Constraints

Author

Listed:
  • Peter J. Barry
  • David R. Willmann

Abstract

A multiperiod risk-programming model is developed to evaluate forward contracting and other financial choices for farmers who are subject to market risks and external credit rationing. The model utilizes mean-variance analysis to derive sets of E-V efficient growth plans reflecting the influence of contracting on income stability, levels of credit, and income growth. A case farm is used to develop the model's decision elements and to survey the credit responses of lenders to contract choices. Model results indicate that the lenders' credit responses may modify the producer's contracting plans and his rate of income growth.

Suggested Citation

  • Peter J. Barry & David R. Willmann, 1976. "A Risk-Programming Analysis of Forward Contracting with Credit Constraints," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(1), pages 62-70.
    • Handle: RePEc:oup:ajagec:v:58:y:1976:i:1:p:62-70.
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    File URL: http://hdl.handle.net/10.2307/1238578
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    Cited by:

    1. Haile, B.O. & Grove, Bennie & Oosthuizen, L.K., 2005. "Impact of capital on the growth process of a sugarcane farm in Mpumalanga," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 44(4), pages 1-13, December.
    2. Raikes, Ronald & Sieck, Gail M. & Miller, Katherine S., 1978. "A Risk Programming Analysis Of Cattle Procurement By Beef Packers," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 10(2), pages 1-6, December.
    3. Escalante, Cesar L. & Rejesus, Roderick M., 2005. "Farmland Control Decisions under Different Intertemporal Risk Behavioral Constructs," 2005 Annual meeting, July 24-27, Providence, RI 19113, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Johnson, Donald A. & Boehlje, Michael, 1983. "Managing Risk By Coordinating Investment, Marketing, And Production Strategies," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 8(2), pages 1-15, December.
    5. Libbin, James D., 1982. "Projections of US farm numbers by Markov processes," ISU General Staff Papers 198201010800008508, Iowa State University, Department of Economics.
    6. Walker, Odell L. & Hardin, Mike L. & Mapp, Harry P., Jr. & Roush, Clint E., 1979. "Farm Growth And Estate Transfer In An Uncertain Environment," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 11(1), pages 1-12, July.
    7. Eddleman, Bobby R. & Moya-Rodriguez, J.E., 1979. "Influence Of Market Diversification On Farm Income Variability Of Soybean Producers," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 11(1), pages 1-5, July.
    8. McCarl, Bruce A. & Musser, Wesley N., 1985. "Modeling Long Run Risk In Production And Investment Decisions," Regional Research Projects > 1985: S-180 Annual Meeting, March 24-27, 1985, Charleston, South Carolina 271799, Regional Research Projects > S-180: An Economic Analysis of Risk Management Strategies for Agricultural Production Firms.
    9. Musser, Wesley N. & Shurley, W. Donald & Williams, Floyd W., 1980. "An E-V Analysis Of Beef Calf Backgrounding Systems In Georgia," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 12(2), pages 1-6, December.
    10. Knight, Thomas O. & Lovell, Ashley C. & Rister, M. Edward & Coble, Keith H., 1989. "An Analysis of Lenders' Influence on Agricultural Producers' Risk Management Decisions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 21(2), pages 21-33, December.
    11. Dubman, Robert W., 1988. "Establishing Peanut Purchasing Contract Terms With Uncertain Market Prices And Input Supplies," Journal of Food Distribution Research, Food Distribution Research Society, vol. 19(1), pages 1-14, February.
    12. Buccola, Steven T. & French, Ben C., 1977. "An E-V Analysis Of Pricing Alternatives For Long-Term Marketing Contracts," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 9(2), pages 1-7, December.
    13. Sonka, Steven T. & Dixon, Bruce L., 1979. "Determinants Of Lender Response To Short-Term Credit Needs Of Small Commercial Farmers," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 11(1), pages 1-5, July.
    14. Miller, Stephen E., 1986. "Forward Contracting Versus Hedging Under Price And Yield Uncertainty," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 18(2), pages 1-8, December.
    15. Gempesaw, Conrado M., II & Tambe, A.M. & Nayga, Rodolfo M., Jr. & Toensmeyer, Ulrich C., 1988. "The Single Index Market Model In Agriculture," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 17(2), pages 1-9, October.
    16. Barry, Peter J. & Baker, C. B. & Sanint, Luis R., 1980. "Farmers 1 Credit Risks And Liquidity Management," Risk Analysis in Agriculture: Research and Educational Developments, January 16-18, 1980, Tucson, Arizona 271568, Regional Research Projects > W-149: An Economic Evaluation of Managing Market Risks in Agriculture.
    17. Musser, Wesley N., 1994. "Progress In Risk Analysis In Regional Projects," 1994 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses Risk, Technical Committee Meeting, March 24-26, 1994, Gulf Shores State Park, Alabama 271553, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    18. Miller, Katherine Sewall, 1978. "A risk-programming analysis of alternative coordination arrangements in beef packing," ISU General Staff Papers 1978010108000018016, Iowa State University, Department of Economics.
    19. Richardson, R.A. & Hardaker, J.B. & Anderson, Jock R., 1976. "Farm-level Decision Models for Developed Agriculture," 1976 Conference, July 26-August 4, 1976, Nairobi, Kenya 182312, International Association of Agricultural Economists.
    20. Bernard V. Tew & Donald W. Reid, 1987. "More Evidence On Expected Value-Variance Analysis Versus Direct Utility Maximization," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 10(3), pages 249-257, September.
    21. Kashanian, Motahareh & Pishvaee, Mir Saman & Sahebi, Hadi, 2020. "Sustainable biomass portfolio sourcing plan using multi-stage stochastic programming," Energy, Elsevier, vol. 204(C).

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