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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Arnaud Reynaud & Aymeric Ricome, 2022. "Marketing contract choices in agriculture: The role of price expectation and price risk management," Post-Print hal-03602696, HAL.
    • Handle: RePEc:hal:journl:hal-03602696
    DOI: 10.1111/agec.12675
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    Cited by:

    1. Daniel May & Ourania Tremma, 2023. "Effects of Sustainable Regulations at Agricultural International Market Failures: A Dynamic Approach," Sustainability, MDPI, vol. 15(3), pages 1-10, January.
    2. Hanna Freudenreich & Sindu W. Kebede, 2022. "Experience of shocks, household wealth and expectation formation: Evidence from smallholder farmers in Kenya," Agricultural Economics, International Association of Agricultural Economists, vol. 53(5), pages 756-774, September.
    3. Boris M. Leybert & Oksana V. Shmaliy & Zhanna V. Gornostaeva & Daria D. Mironova, 2023. "Risk Mitigation in Agriculture in Support of COVID-19 Crisis Management," Risks, MDPI, vol. 11(5), pages 1-36, May.

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