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Farmer Forward Pricing Behavior: Evidence from Marketing Clubs

Published online by Cambridge University Press:  15 September 2016

Kevin McNew  and
Wesley N. Musser
Kevin McNew
Affiliation:
Department of Agricultural Economics and Economics, Montana State University
Wesley N. Musser
Affiliation:
Department of Agricultural and Resource Economics, University of Maryland
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Abstract

Numerous studies have investigated how farmers should use forward pricing markets, but only limited research exists on how farmers actually use these markets. This study relies on data from a real-time forward pricing game employed by Maryland grain marketing clubs from 1994 through 1998. Hypotheses are tested regarding the consistency of farmer behavior with the research literature on hedging. Findings indicate that farmers do not achieve price enhancement, a result consistent with the efficient market hypothesis. However, pricing behavior does not conform to the implications of efficient market models in a number of respects, suggesting farmers may form different expectations than those conveyed by forward prices.

Keywords

grain marketinghedgingrisk management
Type
Articles
Information
Agricultural and Resource Economics Review , Volume 31 , Issue 2 , October 2002 , pp. 200 - 210
Copyright
Copyright © 2002 Northeastern Agricultural and Resource Economics Association 

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