Brian K. Coffey and Ted C. Schroeder
The purpose of this paper is to identify the relationships between grain farm and farmer profiles and their respective choices to use forward pricing techniques and revenue…
Abstract
Purpose
The purpose of this paper is to identify the relationships between grain farm and farmer profiles and their respective choices to use forward pricing techniques and revenue protection crop insurance to manage risk.
Design/methodology/approach
An e-mail survey of Midwestern grain farmers elicited farmer demographic information, farm profile, risk attitudes and farmer use of forward pricing and revenue protection insurance. Responses regarding use of risk management tools were compiled as choices to use possible bundles of tools to account for simultaneous nature of the decision. Choices to use bundles of tools were used as the independent variable categories in a multinomial logit regression. Regressors were relevant data collected from the survey.
Findings
Farm size, using a market advisory service, and being a technology adopter are the most important factors in predicting risk management tool use by grain farmers. Farmers tend to use forward pricing and revenue protection insurance in combination. Large farms are more likely to use forward pricing tools.
Practical implications
Results provide researchers, extension professionals and risk management specialists with a current understanding of how farm and farmer characteristics relate to use of risk management tools. The authors also elaborate on findings to provide guidance for future risk management research.
Originality/value
The survey covered 9 Midwestern states and 648 grain farmers. The survey results update understanding of grain farmers’ risk management practices. The empirical approach treats risk management decisions to use available tools as simultaneous, which recent literature suggests is more appropriate than earlier approaches.
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Exposure risk managers can hedge exchange rate risk with either currency futures or currency options. It is generally suggested that hedgers should choose a hedge instrument that…
Abstract
Exposure risk managers can hedge exchange rate risk with either currency futures or currency options. It is generally suggested that hedgers should choose a hedge instrument that matches the risk profile of the underlying currency position as closely as possible. This advice, however, ignores the possibility that the hedging effectiveness may differ for the alternate risk management tools. This study compares the effectiveness of currency futures and currency options as hedging instruments for covered and uncovered currency positions. Based on Ederington's portfolio theory of hedging, the results show that currency futures provide the more effective covered hedge, while currency options (used to construct a synthetic futures contract) are more effective for an uncovered hedge. Hence, exposure risk managers do not have to sacrifice hedging effectiveness to obtain the desired risk profile. Corporations engaged in international business transactions are commonly exposed to exchange rate risk. Since management is concerned with currency exposure, it can hedge the anticipated exchange rate risk either with futures or options. The choice of the appropriate hedging tool is generally influenced by the type of currency exposure (transaction, translation, or economic risk), the size of the firm, the industry effect, the risk preference of the manager or the firm and his/her familiarity with the available financial instruments and techniques. It is also suggested that a hedger should choose a hedge instrument that matches the risk profile of the underlying currency position as closely as possible. Hence, futures contracts are more suitable for covered hedges, while option contracts are best used for uncovered hedges. Hedging effectiveness of these two hedge instruments must be considered as well in order to evaluate the cost of obtaining the desired risk profile. Some empirical research has shown that the futures contract provides both an appropriate risk profile and a more effective hedge than an options contract for covered positions. If these findings also hold for uncovered currency positions, then the hedging decision involves a trade‐off between the desired risk profile and hedging effectiveness. That is, a hedger would have to decide whether the extra risk protection afforded by the attractive risk profile of options is worth the loss in hedging performance. This study compares the hedging effectiveness of currency futures and currency options for both covered and uncovered positions. Ederington's risk‐minimizing approach is applied to estimate the hedging effectiveness and the least risk hedge ratios which, in turn, are used to assess the trade‐off between risk profile and hedging performance.
The U.S. Congress has been struggling to create a comprehensive energy program. A key component of the present attempt, recommended by President Carter, is a synthetic fuel…
Abstract
The U.S. Congress has been struggling to create a comprehensive energy program. A key component of the present attempt, recommended by President Carter, is a synthetic fuel program. In July of 1979, the President asked for an $88 billion “crash program” to encourage development of synthetic fuels. To date, a three month struggle to reach a consensus between House and Senate conferees has brought only limited results. Compromise is emerging in the form of a proposal for a “synthetic fuels corporation.” The body would have the authority to disperse $20 billion in the form of federal loan guarantees and purchase agreements with more money to become available later.
Man has been seeking an ideal existence for a very long time. In this existence, justice, love, and peace are no longer words, but actual experiences. How ever, with the American…
Abstract
Man has been seeking an ideal existence for a very long time. In this existence, justice, love, and peace are no longer words, but actual experiences. How ever, with the American preemptive invasion and occupation of Afghanistan and Iraq and the subsequent prisoner abuse, such an existence seems to be farther and farther away from reality. The purpose of this work is to stop this dangerous trend by promoting justice, love, and peace through a change of the paradigm that is inconsistent with justice, love, and peace. The strong paradigm that created the strong nation like the U.S. and the strong man like George W. Bush have been the culprit, rather than the contributor, of the above three universal ideals. Thus, rather than justice, love, and peace, the strong paradigm resulted in in justice, hatred, and violence. In order to remove these three and related evils, what the world needs in the beginning of the third millenium is the weak paradigm. Through the acceptance of the latter paradigm, the golden mean or middle paradigm can be formulated, which is a synergy of the weak and the strong paradigm. In order to understand properly the meaning of these paradigms, however, some digression appears necessary.
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Debates why and how some practices become universal – taking as a case in point closed‐chest massage (CCCM). Points out that CCCM was recognized in 1960 and its use generated…
Abstract
Debates why and how some practices become universal – taking as a case in point closed‐chest massage (CCCM). Points out that CCCM was recognized in 1960 and its use generated heated debates, which altered the technique and reshuffled existing infrastructures. Claims that debates act as a catalyst for university. Investigates the emergence of CCCM, the debate on the merits (or otherwise) of closed versus open‐chested cardiac massage, and who could use the method of CCCM. Indicates that CCCM only became universally practised when it was incorporated into the infrastructure for dealing with emergency cases, and thus became taken for granted.
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Self‐injurious behaviour can become an intransigent difficulty, reduce people's quality of life and lead to hospital admissions or other restrictive outcomes (such as the wearing…
Abstract
Self‐injurious behaviour can become an intransigent difficulty, reduce people's quality of life and lead to hospital admissions or other restrictive outcomes (such as the wearing of protective devices to prevent serious injury). Over the last 15 years there have been some important developments in the treatment of severe self‐injury, but the evidence is that these are making little impact on most people's lives. The reasons why this might be are discussed, and it is proposed that it is time for a radical new approach to interventions for self‐injurious behaviour.
In the third of a series of articles on the sacred cows of education Michael Pollard looks at the National Foundation for Educational Research.