Factors influencing Midwestern grain farmers’ use of risk management tools
ISSN: 0002-1466
Article publication date: 19 October 2018
Issue publication date: 5 April 2019
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.
Keywords
Acknowledgements
The authors would like to thank Farm Credit Services of America for granting access to the survey data used in this research and to Linda Smith for her helpful advice on the earlier drafts of the manuscript. All remaining errors are of the authors.
Citation
Coffey, B.K. and Schroeder, T.C. (2019), "Factors influencing Midwestern grain farmers’ use of risk management tools", Agricultural Finance Review, Vol. 79 No. 2, pp. 192-203. https://doi.org/10.1108/AFR-04-2018-0026
Publisher
:Emerald Publishing Limited
Copyright © 2018, Emerald Publishing Limited