Do Income Support Programs Impact Producer Hedging Decisions? Evidence from a Cross-Country Comparative

32 Pages Posted: 15 May 2009

See all articles by Andrea Woolverton

Andrea Woolverton

United Nations - Food and Agriculture Organization (FAO)

Michael E. Sykuta

University of Missouri at Columbia - Division of Applied Social Sciences; University of Missouri at Columbia - Contracting and Organizations Research Institute (CORI)

Multiple version iconThere are 2 versions of this paper

Date Written: May 14, 2009

Abstract

This paper provides a unique perspective to the question of why U.S. producers’ hedging practices are not consistent with the price-risk management literature. We conduct a formal test of income support program impacts with unique producer survey data from South Africa and the United States, which have different producer income support policies. We find that producing in a supported environment decreases hedging for pre-planting and pre-harvest price levels by approximately 30 and 20 percent, respectively. These results suggest that South African price-risk management directly affects production decisions; planting and PRM decisions appear to be made simultaneously, whereas U.S. producers [in an average year] plant first then manage price risk as seasonal prices evolve. This study raises issues for further inquiry regarding both comparative agricultural lending practices and the relative costs of price-risk management (hedging) tools across countries.

Keywords: price supports, risk management, hedging, comparative institutional analysis

JEL Classification: D81, F13, Q14, Q18

Suggested Citation

Woolverton, Andrea and Sykuta, Michael E. and Sykuta, Michael E., Do Income Support Programs Impact Producer Hedging Decisions? Evidence from a Cross-Country Comparative (May 14, 2009). CORI Working Paper No. 2009-04, Available at SSRN: https://ssrn.com/abstract=1404945 or http://dx.doi.org/10.2139/ssrn.1404945

Andrea Woolverton

United Nations - Food and Agriculture Organization (FAO) ( email )

Viale delle Terme di Caracalla
Rome, Lazio 00100
Italy

Michael E. Sykuta (Contact Author)

University of Missouri at Columbia - Contracting and Organizations Research Institute (CORI) ( email )

143 Mumford Hall
Columbia, MO 65211
United States
573-882-1738 (Phone)

HOME PAGE: http://cori.missouri.edu

University of Missouri at Columbia - Division of Applied Social Sciences ( email )

143 Mumford Hall
Columbia, MO 65211
United States
573-882-1738 (Phone)
573-884-3958 (Fax)

HOME PAGE: http://michaelsykuta.com

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