IDEAS home Printed from https://ideas.repec.org/a/spr/jqecon/v15y2017i1d10.1007_s40953-016-0041-8.html
   My bibliography  Save this article

Hedging in Presence of Crop Yield, Crop Revenue and Rainfall Insurance

Author

Listed:
  • Thiagu Ranganathan

    (University of Delhi (North Campus))

  • Usha Ananthakumar

    (Indian Institute of Technology Bombay)

Abstract

This paper analyses hedging using price risk management instruments in presence of crop yield, crop revenue and rainfall insurance for soybean farmers in Dewas district of India. Using numerical simulations, we analyse the demand for hedging and performance of the hedging strategies involving futures, options and different insurance products. We also study the impact of risk aversion, biases in futures prices and transaction costs on various hedging strategies and potential benefits from these strategies. Results indicate that in most scenarios, farmer’s welfare (in terms of willingness to receive) is improved by using insurance products along with hedging.

Suggested Citation

  • Thiagu Ranganathan & Usha Ananthakumar, 2017. "Hedging in Presence of Crop Yield, Crop Revenue and Rainfall Insurance," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(1), pages 151-171, March.
    • Handle: RePEc:spr:jqecon:v:15:y:2017:i:1:d:10.1007_s40953-016-0041-8
    DOI: 10.1007/s40953-016-0041-8
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40953-016-0041-8
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40953-016-0041-8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Moschini, Giancarlo & Lapan, Harvey, 1995. "The Hedging Role of Options and Futures under Joint Price, Basis, and Production Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 1025-1049, November.
    2. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
    3. Jean-Philippe Gervais & Maurice Doyon, 2004. "Developing Hedging Strategies for Québec Hog Producers under Revenue Insurance," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 52(1), pages 35-53, March.
    4. Dehn,Jan, 2000. "Commodity price uncertainty in developing countries," Policy Research Working Paper Series 2426, The World Bank.
    5. C. Vale & Vincent Maurelli, 1983. "Simulating multivariate nonnormal distributions," Psychometrika, Springer;The Psychometric Society, vol. 48(3), pages 465-471, September.
    6. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    7. Fafchamps, Marcel, 2010. "Vulnerability, risk management and agricultural development," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thiagu Ranganathan & Sarthak Gaurav & Ashish Singh, 2016. "Demand for Price Insurance among Farmers in India: A Choice Experiment-based Approach," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 10(2), pages 198-224, May.
    2. Thiagu Ranganathan & Sarthak Gaurav & Ashish Singh, 2014. "Using choice experiments, we estimate the willingness to pay for price insurance among cotton and paddy farmers in the Indian state of Gujarat. We also identify the interactions between the demand for," IEG Working Papers 340, Institute of Economic Growth.
    3. Hurley, Terrance M., 2010. "A review of agricultural production risk in the developing world," Working Papers 188476, HarvestChoice.
    4. Mahul, Olivier, 2002. "Hedging Price Risk in the Presence of Crop Yield and Revenue Insurance," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24881, European Association of Agricultural Economists.
    5. Coble, Keith H. & Barnett, Barry J., 1999. "The Role Of Research In Producer Risk Management," Professional Papers 15803, Mississippi State University, Department of Agricultural Economics.
    6. George Rapsomanikis & Alexander Sarris, 2006. "The Impact of Domestic and International Commodity Price Volatility on Agricultural Income Instability: Ghana, Vietnam and Peru," WIDER Working Paper Series DP2006-04, World Institute for Development Economic Research (UNU-WIDER).
    7. Xing, Liu & Pietola, Kyosti, 2005. "Forward Hedging Under Price and Production Risk of Wheat," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24467, European Association of Agricultural Economists.
    8. Sarris, Alexander, 2002. "The demand for commodity insurance by developing country agricultural producers - theory and an application to cocoa in Ghana," Policy Research Working Paper Series 2887, The World Bank.
    9. Mahul, Olivier, 2002. "Hedging Price Risk In The Presence Of Crop Yield And Revenue Insurance," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19070, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    10. Renata Baborska & Emilio Hernandez & Emiliano Magrini & Cristian Morales-Opazo, 2020. "The impact of financial inclusion on rural food security experience: A perspective from low-and middle-income countries," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 10(2), pages 1-18.
    11. Coble, Keith H. & Heifner, Richard G. & Zuniga, Manuel, 2000. "Implications Of Crop Yield And Revenue Insurance For Producer Hedging," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-21, December.
    12. Emiliano Magrini & Pierluigi Montalbano, 2012. "Trade openness and vulnerability to poverty: Vietnam in the long-run (1992-2008)," Working Paper Series 3512, Department of Economics, University of Sussex Business School.
    13. Zimmerman, Frederick J. & Carter, Michael R., 2003. "Asset smoothing, consumption smoothing and the reproduction of inequality under risk and subsistence constraints," Journal of Development Economics, Elsevier, vol. 71(2), pages 233-260, August.
    14. Ardian Harri & John Michael Riley & John D. Anderson & Keith H. Coble, 2009. "Managing economic risk in value‐based marketing of fed cattle," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 295-306, May.
    15. Kurosaki, Takashi & Fafchamps, Marcel, 2002. "Insurance market efficiency and crop choices in Pakistan," Journal of Development Economics, Elsevier, vol. 67(2), pages 419-453, April.
    16. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," The World Bank Research Observer, World Bank, vol. 17(2), pages 141-166, September.
    17. Sigl, Lukas & Hirschauer, Norbert, 2024. "The hedging efficiency of wheat futures in various types of farms in Germany," SocArXiv pvq9t, Center for Open Science.
    18. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," World Bank Research Observer, World Bank Group, vol. 17(2), pages 141-166, September.

    More about this item

    Keywords

    Hedging; Crop yield insurance; Crop revenue insurance; Rainfall insurance;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jqecon:v:15:y:2017:i:1:d:10.1007_s40953-016-0041-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.