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Assessment of Risk When Contract Crops are Included Among Other Crop Alternatives*

Published online by Cambridge University Press:  05 September 2016

James B. Kliebenstein
Affiliation:
University of Missouri-Columbia
John T. Scott Jr.
Affiliation:
University of Illinoisat Urbana-Champign

Extract

All those who have worked closely with farmers know that uncertainties in farming are great. They stem from many sources — natural forces such as weather, disease, variation in market prices, etc. Some uncertainties, e.g., weather hazards such as hail, can be insured against; others can be reduced by increased wealth. Farmers can also reduce uncertainty through contracting, as these may specify price and quantity.

Most crops grown in the U.S. Central Cornbelt are sold on highly developed public markets with daily prices and offerings. While target prices for soybeans and corn exist, price uncertainty still remains at the time farmers make decisions. Futures markets have long been available. However, few farmers use futures markets to predetermine prices in their crop planning process. One reason for this is that while use of futures markets can remove price risks, biological weather risks remain.

Type
Research Article
Copyright
Copyright © Southern Agricultural Economics Association 1975

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Footnotes

*

University of Missouri Agricultural Experiment Station Journal Series No. 7060.

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