Marius Michels, Johannes Möllmann and Oliver Musshoff
Adoption rates of commodity futures contracts among farmers are rather low in Europe despite their political support. The purpose of this paper is to examine whether the…
Abstract
Purpose
Adoption rates of commodity futures contracts among farmers are rather low in Europe despite their political support. The purpose of this paper is to examine whether the Technology Acceptance Model (TAM) can contribute to the understanding of farmers’ intention to use commodity futures contracts. Here, the authors explicitly distinguish between usage motives for price risk reduction and speculation.
Design/methodology/approach
The study is based on an online survey with 134 German farmers using partial least squares structural equation modeling to estimate the TAM.
Findings
The intention to use commodity futures contracts is mostly driven by farmers’ motivation for speculation rather than price risk reduction. Assuming risk averse farmers, this result could explain low adoption rates. Furthermore, perceived ease of use has a positive effect on the intention to use commodity futures contracts.
Practical implications
Handling of price hedging instruments should be facilitated to increase farmers’ adoption. Effective marketing trainings, which can demonstrate the ability of commodity futures contracts to reduce price risk, could increase farmers’ motivation to use them for their risk management instead of speculation.
Originality/value
This study analyzes path relationships between constructs expected to influence the intention to use commodity futures contracts which are allowed to be estimated by the TAM in one model. Here, the authors explicitly distinguish between usage motives for price risk reduction and speculation. This is the first study applying the TAM to price risk management tools.
Details
Keywords
Johannes Möllmann, Marius Michels and Oliver Musshoff
The outstanding reform of the Common Agriculture Policy allows for changes regarding its most criticized component, the direct payment scheme. The purpose of this paper is to…
Abstract
Purpose
The outstanding reform of the Common Agriculture Policy allows for changes regarding its most criticized component, the direct payment scheme. The purpose of this paper is to investigate farmers’ acceptance of subsidized whole farm income insurance (WFI) and single-crop, multi-peril revenue insurance (RI) that are associated with a reduction of direct payments.
Design/methodology/approach
By applying a generalized multinomial logit model on data of a discrete choice experiment, German farmers’ preferences, expressed as their willingness to pay (WTP), for WFI and RI are revealed.
Findings
The results show a positive WTP for WFI and RI. The average farmer has a higher WTP for WFI than for RI. By increasing the coverage level, the negative influence of a reduction of direct payments on WTP for insurance can be compensated. Individual risk attitude and assessed importance of direct payments for the farm business show a statistically significant influence on the WTP.
Practical implications
The results suggest that, even if direct payments were abolished in order to subsidize WFI or RI, German farmers’ WTP for both insurance products would remain positive. However, to finally assess whether subsidizing insurance is the right means of providing public support, it is necessary to assess whether farmers’ WTP meets the costs for such an insurance scheme.
Originality/value
To the authors’ knowledge, this is the first study investigating German farmers’ WTP for WFI and RI using an experimental approach by explicitly considering the partial to complete replacement of direct payments by subsidized insurance.