Forward Pricing Behavior of Corn and Soybean Producers

Authors

Todd Davis, Clemson University
George Patrick, Purdue University
Keith Coble, Mississippi State UniversityFollow
Thomas Knight, Texas Tech University, LubbockFollow
Alan Baquet, University of Nebraska-LincolnFollow

Document Type

Article

Date of this Version

4-2005

Comments

Published in Journal of Agricultural and Applied Economics, 37, 1 (April 2005): 145-160. Copyright © 2005 Southern Agricultural Economics Association. Used by permission.

Abstract

Forward pricing behavior of random samples of Indiana, Nebraska, and Mississippi crop producers was analyzed using Heckman's two-step limited information maximum likelihood estimation procedure. Producers who forward priced during the 1995-1998 period generally expected to forward price in 1999 using similar techniques. Probit models were estimated for cash forward contracts and taking a direct position in futures or options separately and combined. Results provide limited support for the hypothesis that forward pricing should be analyzed as an adoption decision. Variables reflecting risk attitudes do affect the decision to use forward pricing, while variables related to economic position affect the level of forward pricing.