Risk management behavior of agricultural producers: preferences and perceptions

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Hodgson, Karen
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The objective of this paper is to examine factors affecting the risk management behavior of Western Canadian grain producers. The first part analyzes factors affecting perceptions of crop insurance. Data for the study is generated from a survey of agricultural producers in Western Canada, and a probit model is used for estimation. Results show that if farmers receive fair crop insurance assessments, quick payments, and have a high knowledge level of crop insurance, they are more likely to have a more positive perception of crop insurance. The second part examines factors that could be influencing the frequency by which agricultural producers hedge their price risk with futures. The same data and estimation method are used. Results show that if farmers use forward contracts and options to hedge price risk, speculate with futures, place a high importance on low brokerage fees, or have larger farms, that are more likely to hedge.
Hedging, Risk, Futures, Agriculture, Survey, Probit