Hedgers located far from organized commodity exchanges suffer a mismatch between their local prices and exchange prices. Futures and options traded on the exchange may still be valuable to distant hedgers, but only to the extent that basis risk is small. Forward contracting allows hedgers to...

Expected prices for storable commodities often lie below spot prices plus interest and marginal storage charges. Recently this gap has been explained as the value of a call option held by a representative storer whenever a positive probability exists that stocks could dwindle to zero. However,...

The optimal hedging portfolio is shown to include both futures and options under a variety of circumstances when the marginal cost of hedging is nonzero. Futures and options are treated as substitute goods, and the properties of the resulting hedging demand system are explained. The overall...

The representative agent hypothesis is disputable on theoretical grounds because it is inconsistent with observed trading behavior and the existence of speculative markets. In such markets, the representative agent hypothesis implies agents hold homogeneous expectations. If this were true,...

Characteristics of farm level yield and revenue loss that is systemic with yield and revenue loss at the county, state, and U.S. level are examined using farm yields from the Illinois and Kansas farm business management associations. The data begins with 1972. Share of yield and revenue loss...

Recent changes in federal farm programs and contemporary farm program proposals highlight an evolving shift in farm policy from income support to risk management. A mix of price- and revenue-based commodity programs as well as yield- and revenue-based insurance products provide crop producers a...

Although significant research has been done on managing farmers’ financial risk through federal programs such as federal crop insurance, to date, little attention has been paid to the ability of on-farm management’s potential to mitigate agricultural risk. Federal crop insurance could...

Research has highlighted a growing gap between public perceptions of farming and the realities of modern agriculture and the food industry. A number of food scandals have exacerbated consumers’ critical perceptions of the agribusiness sector. This can threaten the reputation and legitimacy of...

In this study we address the following question: does friendship facilitate the adoption of a risk inherent new product? We did a validation study with a previously recorded friendship network and simulated scenario of a new energy drink. We learn that spill over effect for such a friendship...