Shawn Cole and Barrett Kirwan discuss the US farmers' hedging behavior by focusing on marketing contracts that allow farmers to lock in a crop's price long before harvest, avoiding price risk. Every year, producers report quantity of each crop put under the marketing contract. Shawn and Barrett rely on information collected by Agricultural Resource Management Survey (ARMS) every year from 1999 to 2005. The ARMS data are nationally representative, accounting for over 600,000 farms. There could be fixed-costs associated with hedging. Alternatively, more able farmers may be able to generate higher revenue and also be more able to manage risk. Hedging behavior varies in systematic ways that correspond to standard models of behavior. Education matters, as does farm size and the diversification of the farm. The ARMS data are one of the very few comprehensive, representative data sets that include information about investment, production, and risk management decisions.
ASJC Scopus subject areas
- Agricultural and Biological Sciences (miscellaneous)
- Economics and Econometrics