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PR - Investigating Factors Affecting The Forward Pricing Behaviour Of Vaalharts Maize Producers: A Two-step Econometric Approach

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  • Jordaan, H.
  • Grové, B.

Abstract

A two-step econometric approach is employed to investigate the factors that influence the forward pricing behaviour of Vaalharts maize producers. The first step is to analyse the adoption decision with a binary sub-model, while the second step is to model the quantity decision, conditional of the adoption decision, in a linear sub-model. Based on the results, two distinct sets of variables influence the two decisions. The adoption of forward pricing is associated with higher levels of human capital, while the quantity decision is mainly driven by farmers’ risk attitudes and their perceptions of forward pricing in price risk management. Since two sets of variables influence the two decisions, it is insufficient to educate farmers only on the benefit of using forward pricing methods. Such education does not empower farmers to use these tools. Future research and education should emphasise on how much to contract, which type of contract to use, and the frequency of contracting.

Suggested Citation

  • Jordaan, H. & Grové, B., 2007. "PR - Investigating Factors Affecting The Forward Pricing Behaviour Of Vaalharts Maize Producers: A Two-step Econometric Approach," 16th Congress, Cork, Ireland, July 15-20, 2007 345387, International Farm Management Association.
    • Handle: RePEc:ags:ifma07:345387
    DOI: 10.22004/ag.econ.345387
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    References listed on IDEAS

    as
    1. Jordaan, Henry & Grove, Bennie, 2007. "Factors Affecting Maize Producers Adoption of Forward Pricing in Price Risk Management: The Case of Vaalharts," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(4), pages 1-18, December.
    2. Bown, A.N. & Ortmann, G.F. & Darroch, M.A.G., 1999. "Use Of Maize Marketing Alternatives And Price Risk Management Tools By Commercial Maize Farmers In South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 38(3).
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    5. Sartwelle, James & O'Brien, Daniel & Tierney, William & Eggers, Tim, 2000. "The Effect of Personal and Farm Characteristics upon Grain Marketing Practices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 32(1), pages 95-111, April.
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