IDEAS home Printed from https://ideas.repec.org/p/ags/ifma03/24376.html
   My bibliography  Save this paper

Should Farmers Invest in Financial Assets as a Risk Management Strategy? Some Evidence from New Zealand

Author

Listed:
  • Nartea, Gilbert V.
  • Pellegrino, Juan M.
  • Webster, Paul

Abstract

Off-farm investment as a risk management strategy is not widespread among New Zealand sheep and beef farmers. This study explores the potential for risk reduction by the diversification of farm asset portfolios to include financial investments such as industrial equities and government bonds of various types. Results show that the negative correlations between long-run rates of return on farm assets and financial investments could result in a significant reduction of risk if equities and bonds were included in farm investment portfolios. However, when combined with information about attitudes to risks, it does not seem likely that farmers would adopt such strategies purely in order to stabilise incomes. Deregulation of the New Zealand economy in the mid 1980's had little impact on farmers' optimal allocation of their assets.

Suggested Citation

  • Nartea, Gilbert V. & Pellegrino, Juan M. & Webster, Paul, 2003. "Should Farmers Invest in Financial Assets as a Risk Management Strategy? Some Evidence from New Zealand," 14th Congress, Perth, Western Australia, August 10-15, 2003 24376, International Farm Management Association.
    • Handle: RePEc:ags:ifma03:24376
    DOI: 10.22004/ag.econ.24376
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/24376/files/cp03we01.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.24376?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
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Atanu Saha & C. Richard Shumway & Hovav Talpaz, 1994. "Joint Estimation of Risk Preference Structure and Technology Using Expo-Power Utility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(2), pages 173-184.
    2. J. Brian Hardaker & James W. Richardson & Gudbrand Lien & Keith D. Schumann, 2004. "Stochastic efficiency analysis with risk aversion bounds: a simplified approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 253-270, June.
    3. Catherine J. Morrison Paul & Warren E. Johnston & Gerald A. G. Frengley, 2000. "Efficiency in New Zealand Sheep and Beef Farming: The Impacts of Regulatory Reform," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 325-337, May.
    4. Just, Richard E., 2003. "Risk research in agricultural economics: opportunities and challenges for the next twenty-five years," Agricultural Systems, Elsevier, vol. 75(2-3), pages 123-159.
    5. Marvin J. Painter, 2000. "Should Saskatchewan Farmland be Part of Your Investment Portfolio?," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 48(1), pages 39-50, March.
    6. Peter J. Barry, 1980. "Capital Asset Pricing and Farm Real Estate," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 549-553.
    7. Martin, Sandra, 1996. "Risk Management Strategies in New Zealand Agriculture and Horticulture," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 64(01), pages 1-14, April.
    8. Frengley, Gerald A.G. & Engelbrecht, Robert, 1998. "Economic Deregulation and the Adjustment of New Zealand Farmers," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 13(1), pages 1-5.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Svend Rasmussen, 2013. "A model for the optimal risk management of (farm) firms," IFRO Working Paper 2013/10, University of Copenhagen, Department of Food and Resource Economics.
    2. Leppälä, Jarkko & Rautiainen, Risto & Kauranen, Ilkka, 2015. "Analysis of risk management tools applicable in managing farm risks: A literature review," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 4(3), April.
    3. Svend Rasmussen & Anders L. Madsen & Mogens Lund, 2013. "Bayesian network as a modelling tool for risk management in agriculture," IFRO Working Paper 2013/12, University of Copenhagen, Department of Food and Resource Economics.
    4. Shadbolt, Nicola M. & Olubode-Awosola, Femi, 2016. "Resilience, Risk and Entrepreneurship," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(2), pages 1-20, May.

    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. Claassen, Roger & Cooper, Joseph C. & Carriazo, Fernando, 2011. "Crop Insurance, Disaster Payments, and Land Use Change: The Effect of Sodsaver on Incentives for Grassland Conversion," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 43(2), pages 195-211, May.
    2. Nauges, Celine & Wheeler, Sarah Ann & Zuo, Alec, 2016. "Elicitation of irrigators’ risk preferences from observed behaviour," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(3), July.
    3. Claassen, Roger & Carriazo, Fernando & Cooper, Joseph C. & Hellerstein, Daniel & Ueda, Kohei, 2011. "Grassland to Cropland Conversion in the Northern Plains: The Role of Crop Insurance, Commodity, and Disaster Programs," Economic Research Report 262239, United States Department of Agriculture, Economic Research Service.
    4. Chi Su & Richard A. Schoney & James F. Nolan, 2023. "Buy, sell or rent the farm: succession planning and the future of farming on the Great Plains," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 18(3), pages 627-669, July.
    5. B. James Deaton & Chad Lawley, 2022. "A survey of literature examining farmland prices: A Canadian focus," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(2), pages 95-121, June.
    6. Erwin WAUTERS & Frankwin van WINSEN & Yann de MEY & Ludwig LAUWERS, 2014. "Risk perception, attitudes towards risk and risk management: evidence and implications," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(9), pages 389-405.
    7. Williams, John & McSweeney, Peter & Salmon, Robert, 2014. "Australian Farm Investment: Domestic and Overseas Issues," Papers 234408, University of Melbourne, Melbourne School of Land and Environment.
    8. Daniel Solís & Boris E. Bravo‐Ureta & Ricardo E. Quiroga, 2009. "Technical Efficiency among Peasant Farmers Participating in Natural Resource Management Programmes in Central America," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(1), pages 202-219, February.
    9. Li, Chenguang & Sexton, Richard J., 2009. "Impacts of Retailers’ Pricing Strategies for Produce Commodities on Farmer Welfare," 2009 Conference, August 16-22, 2009, Beijing, China 51720, International Association of Agricultural Economists.
    10. Painter, Marvin J., 2007. "The impact of management skills on farm incomes in Canada," AFBM Journal, Australasian Farm Business Management Network, vol. 4(1-2), pages 1-13.
    11. He, Yong, 2018. "Can the visible and invisible hands coexist in land pricing?," MPRA Paper 88770, University Library of Munich, Germany.
    12. Sean Pascoe & Phoebe Koundouri & Trond Bjørndal, 2007. "Estimating Targeting Ability in Multi-Species Fisheries: A Primal Multi-Output Distance Function Approach," Land Economics, University of Wisconsin Press, vol. 83(3), pages 382-397.
    13. Lehtonen, Heikki & Kujala, Sanna, 2007. "Climate change impacts on crop risks and agricultural production in Finland," 101st Seminar, July 5-6, 2007, Berlin Germany 9259, European Association of Agricultural Economists.
    14. Kim, Tae-Hun, 2008. "The measurement of farmers' risk attitudes using a non-structural approach," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 31(2), pages 1-18, May.
    15. J.Ph. Boussemart & K. Kerstens & S. Blancard & W. Briec, 2007. "Technology Adoption in French Agriculture and the role of Financial Constraints," Post-Print hal-00287974, HAL.
    16. Z. Bar‐Shira & R.E. Just & D. Zilberman, 1997. "Estimation of farmers' risk attitude: an econometric approach," Agricultural Economics, International Association of Agricultural Economists, vol. 17(2-3), pages 211-222, December.
    17. Kelvin Balcombe & Hristos Doucouliagos & Iain Fraser, 2007. "Input usage, output mix and industry deregulation: an analysis of the Australian dairy manufacturing industry ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(2), pages 137-156, June.
    18. Bitsch, Vera & Harsh, Stephen B., 2004. "Labor Risk Attributes in the Green Industry: Business Owners' and Managers' Perspectives," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 36(3), pages 731-745, December.
    19. Li, Xin, 2016. "The Farmland Valuation Revisited," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 4(2), pages 1-14, April.
    20. Stefani, Gianluca & Gadanakis, Yiorgos & Lombardi, Ginevra Virginia & Tiberti, Marco, 2017. "The impact of financial leverage on farms capacity to react in market shocks," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261156, European Association of Agricultural Economists.

    More about this item

    Keywords

    Agricultural Finance; Risk and Uncertainty;

    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:ags:ifma03:24376. 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/ifmaaea.html .

    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.