The twin problems of moral hazard and adverse selection are often blamed for the lack of insurance for many fruits and vegetables. This paper develops an alternative method of testing for adverse selection that uses a two-stage approach to determine the effects of technical inefficiency on the...

The risks associated with farming activities are likely to increase in the future. It, therefore, appears worthwhile to analyse new risk management instruments. This paper investigates weather derivatives for which a market has already emerged in the USA. Contrary to traditional financial...

The importance of weather as a production factor in agriculture is well established long time and a significant portion of yield fluctuations is caused by weather risks. Traditionally, farmers have tried to hedge against unfavorable weather using insurance, such as crop insurance. In recent...

Since the mid-nineties, agricultural economists discuss the suitability of “weather derivatives” as hedging instruments for volumetric risks in agriculture. Contrary to traditional insurance contracts, the payoffs of such derivatives are linked to weather indices (e.g. accumulated rainfall...

This paper estimates optimal hedging ratios for a Finnish spring wheat producer under price and yield risk. The forward contract available for hedging fixes the price and quantity at the time of sowing for a delivery at harvest. Autoregressive models are used to obtain point forecasts for the...

Options on agricultural futures are popular financial instruments used for agricultural price risk management and to speculate on future price movements. Poor performance of Black’s classical option pricing model has stimulated many researchers to introduce pricing models that are more...

We theoretically examine a farmer’s coverage demand with area and individual insurance plans as either separate or integrated options. The individual and area losses are assumed to be imperfectly and positively correlated. With actuarially fair rates, the farmer will fully insure with the...

Cash and futures prices should reach equality, or converge, upon contract maturity. Traders can impose convergence during the delivery month througharbitrage behavior: either making or taking delivery on futures contracts. If convergence is not predictable, a futures market fails to provide a...

The influence of climate variability on agricultural production and financial risks faced by an individual or an institution has been the center of the public discussion in the recent years. The changing weather patterns and environmental conditions could cause substantial unpredicted economic...

With the advent of the WTO’s Doha Development Agenda, as well as the MillenniumDevelopment Goals aiming to reduce poverty by 50 percent by 2015, poverty impacts oftrade reforms have attracted increasing attention. This has been particularly true ofagricultural trade reform due to the...