Do Income Support Programs Impact Producer Hedging Decisions? Evidence from a Cross-Country Comparative
Review of Agricultural Economics, Vol. 31, No. 4, pp. 834-852, 2009
19 Pages Posted: 2 Apr 2010
Date Written: December 1, 2009
This article provides a unique perspective to 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 survey data from South Africa and the United States, which have different producer income support policies. We find that producing in a supported environment (U.S.) decreases hedging for preplanting and preharvest expected yields by 30.39% and 20.03%, respectively. This study raises issues for further inquiry regarding both comparative agricultural lending practices and the relative costs of price-risk management tools.
Keywords: risk managment, institutions, comparative, hedging, commodities, corn, South Africa, futures
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