Attitudes towards hedging by diversified and non-diversified farmers
Deregulation on the market for agricultural products leads to a more globalised market with increasing price fluctuations. This, in turn, places the farmer in positions influenced by new risks but also improved opportunities. The farmers are faced by uncertainty in terms of financial outcome. To be...
| Autores principales: | , |
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| Formato: | Second cycle, A2E |
| Lenguaje: | sueco Inglés |
| Publicado: |
2012
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| Materias: | |
| Acceso en línea: | https://stud.epsilon.slu.se/5069/ |
| _version_ | 1855570784061227008 |
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| author | Eke-Göransson, Charlotte Rinman, Magnus |
| author_browse | Eke-Göransson, Charlotte Rinman, Magnus |
| author_facet | Eke-Göransson, Charlotte Rinman, Magnus |
| author_sort | Eke-Göransson, Charlotte |
| collection | Epsilon Archive for Student Projects |
| description | Deregulation on the market for agricultural products leads to a more globalised market with increasing price fluctuations. This, in turn, places the farmer in positions influenced by new risks but also improved opportunities. The farmers are faced by uncertainty in terms of financial outcome. To be able to utilise these new market conditions it becomes increasingly important for farmers to continuously follow the price trend, and to develop strategies how to manage the risks exposed by a volatile market.
Farmers with different conditions perceive risk in different ways. Hence, their risk management behaviour will vary. The aim of this study is to investigate differences in selling strategies of grain between diversified farmer (crop and livestock producers) and non-diversified farmers (crop producers). The diversified farmers use a major quantity of their grain as feed, while the non-diversified farmers are forced to manage a greater quantity of cash crop. Thus, the selling strategies will obviously vary. Therefore, a further investigation is to realise the farmers’ attitudes and preferences towards risk, which is made through the theoretical framework of decision-making theory, expected utility theory and portfolio theory.
The study is conducted as a qualitative research study. The empirical material is gathered through in depth-interviews with 12 farmers, where 5 of the farmers are diversified and 7 are non-diversified. The farmers are located in the southern part of Sweden, from Mälardalen in the north to Scania in the south.
The following 6 conclusions can be distinguished in the study:
- Diversified farmers are more intuitive in their decision making approaches than non-diversified farmers.
- Diversified farmers are generally more risk averse than non-diversified farmers.
- Non-diversified farmers tend to sell a larger share on the spot market.
- Both diversified and non-diversified farmers reveal a weak knowledge about the value of their production cost for crops.
- Farmers that rent a greater acreage are more likely to use hedging tools.
- Diversified farmers are more likely to have storage capacity for a total harvest.
Those are the major differences that separate the two groups. The differences are due to several factors. A particularly important factor is found to be the farm’s geographic location, that is, if the farm can utilise comparative advantages. Comparative advantages that occur due to farm location in relation to nearest crop company. |
| format | Second cycle, A2E |
| id | RepoSLU5069 |
| institution | Swedish University of Agricultural Sciences |
| language | Swedish Inglés |
| publishDate | 2012 |
| publishDateSort | 2012 |
| record_format | eprints |
| spelling | RepoSLU50692012-11-23T15:32:53Z https://stud.epsilon.slu.se/5069/ Attitudes towards hedging by diversified and non-diversified farmers Eke-Göransson, Charlotte Rinman, Magnus Economics and management Deregulation on the market for agricultural products leads to a more globalised market with increasing price fluctuations. This, in turn, places the farmer in positions influenced by new risks but also improved opportunities. The farmers are faced by uncertainty in terms of financial outcome. To be able to utilise these new market conditions it becomes increasingly important for farmers to continuously follow the price trend, and to develop strategies how to manage the risks exposed by a volatile market. Farmers with different conditions perceive risk in different ways. Hence, their risk management behaviour will vary. The aim of this study is to investigate differences in selling strategies of grain between diversified farmer (crop and livestock producers) and non-diversified farmers (crop producers). The diversified farmers use a major quantity of their grain as feed, while the non-diversified farmers are forced to manage a greater quantity of cash crop. Thus, the selling strategies will obviously vary. Therefore, a further investigation is to realise the farmers’ attitudes and preferences towards risk, which is made through the theoretical framework of decision-making theory, expected utility theory and portfolio theory. The study is conducted as a qualitative research study. The empirical material is gathered through in depth-interviews with 12 farmers, where 5 of the farmers are diversified and 7 are non-diversified. The farmers are located in the southern part of Sweden, from Mälardalen in the north to Scania in the south. The following 6 conclusions can be distinguished in the study: - Diversified farmers are more intuitive in their decision making approaches than non-diversified farmers. - Diversified farmers are generally more risk averse than non-diversified farmers. - Non-diversified farmers tend to sell a larger share on the spot market. - Both diversified and non-diversified farmers reveal a weak knowledge about the value of their production cost for crops. - Farmers that rent a greater acreage are more likely to use hedging tools. - Diversified farmers are more likely to have storage capacity for a total harvest. Those are the major differences that separate the two groups. The differences are due to several factors. A particularly important factor is found to be the farm’s geographic location, that is, if the farm can utilise comparative advantages. Comparative advantages that occur due to farm location in relation to nearest crop company. Spannmålsmarknaden har mött stora förändringar under de senaste åren, delvis till följd av avreglering av marknaden för jordbruksprodukter och ökat intresse för råvaruinvesteringar. Detta leder bland annat till att spannmålspriserna fluktuerar kraftigare än vad de gjort tidigare. Lantbrukaren påverkas således av nya risker, kunskap och tillämpning av riskhantering i jordbruket blir allt viktigare. Genom prissäkring kan lantbrukaren säkra sig mot oväntade prisfluktuationer och för att kunna tillgodogöra sig dessa fördelar krävs kontinuerlig kunskap om prisutvecklingen på marknaden. Denna studie syftar till att identifiera skillnaderna mellan diversifierade lantbrukare (animalie- och spannmålsproducenter) och icke diversifierade (endast spannmålsproducenter) lantbrukare. Dessa två grupper har olika förutsättningar. De flesta diversifierade lantbrukarna använder en större kvantitet av den egenproducerade spannmålen som foder, vilket i förlängningen är ett sätt att hantera en volatil prismarknad. Icke diversifierade lantbrukare möter utmaningen att hantera den volatila marknaden genom att utveckla olika försäljningsstrategier. Detta kan betyda att de två grupperna har olika inställning till risk. Skillnaderna som studien syftar till att undersöka är; preferenser och attityder gentemot risk samt utformningen av prissäkringsstrategier. Undersökningen görs utifrån teoribakgrunden; beslutsfattarteorin, förväntad nyttoteorin och portföljteorin. Det empiriska materialet inhämtas genom 12 djupintervjuer med lantbrukare som är aktiva i den södra delen av Sverige, varav fem är diversifierade och sju är icke diversifierade lantbrukare. Följande sex slutsatser kan fastställas av studien: - Diversifierade lantbrukare är mer intuitiva i sitt beslutsfattande. - Diversifierade lantbrukare är generellt sett mer riskaversiva. - Icke diversifierade lantbrukare tenderar till att sälja mer på spotmarknaden. - Båda grupperna visar bristande kännedom om sina produktionskostnader. - Lantbrukare som arrenderar en större andel areal visar större benägenhet att använda sig av prissäkringsinstrument. - Diversifierade lantbrukare har lagringskapacitet för hela skörden i större utsträckning. Dessa slutsatser visar sig vara de tydligaste skillnaderna mellan de två grupperna, skillnaderna beror på ett flertal faktorer. En lantbrukares prissäkringsstrategi kan även bero på gårdens geografiska förhållande. Närheten till lokal spannmålshandlare vilket uttrycks som komparativa fördelar i studien är ytterligare en faktor som visar sig påverka lantbrukarens beslutsfattande. 2012-11-19 Second cycle, A2E NonPeerReviewed application/pdf sv https://stud.epsilon.slu.se/5069/7/Eke_Goransson_et_al_121119.pdf Eke-Göransson, Charlotte and Rinman, Magnus, 2012. Attitudes towards hedging by diversified and non-diversified farmers : a comparative qualitative study. Second cycle, A2E. Uppsala: (NL, NJ) > Dept. of Economics <https://stud.epsilon.slu.se/view/divisions/OID-510.html> urn:nbn:se:slu:epsilon-s-1873 eng |
| spellingShingle | Economics and management Eke-Göransson, Charlotte Rinman, Magnus Attitudes towards hedging by diversified and non-diversified farmers |
| title | Attitudes towards hedging by diversified
and non-diversified farmers |
| title_full | Attitudes towards hedging by diversified
and non-diversified farmers |
| title_fullStr | Attitudes towards hedging by diversified
and non-diversified farmers |
| title_full_unstemmed | Attitudes towards hedging by diversified
and non-diversified farmers |
| title_short | Attitudes towards hedging by diversified
and non-diversified farmers |
| title_sort | attitudes towards hedging by diversified
and non-diversified farmers |
| topic | Economics and management |
| url | https://stud.epsilon.slu.se/5069/ https://stud.epsilon.slu.se/5069/ |