TY - UNPB

T1 - Futures for farmers: hedging participation and the Mexican corn scheme

AU - Benavides, G

AU - Snowden, P N

PY - 2005

Y1 - 2005

N2 - Administered commodity price schemes in developing countries have proved ineffective in raising farmers’ incomes and price stabilisation through futures markets is increasingly advocated as the alternative policy objective. A potential difficulty is that farmers tend not to hedge extensively, even in developed countries where access to futures markets is long established. Explanations for this reticence are examined here with context provided by the Mexican hedging programme, which incorporates financial incentives to spur adoption. Applying representative data for corn to a well-known analysis of the hedging decision suggests that limited participation may reflect rational calculation rather than farmer ‘inertia’. A policy implication is that permanent access subsidies are difficult to justify from the national perspective.

AB - Administered commodity price schemes in developing countries have proved ineffective in raising farmers’ incomes and price stabilisation through futures markets is increasingly advocated as the alternative policy objective. A potential difficulty is that farmers tend not to hedge extensively, even in developed countries where access to futures markets is long established. Explanations for this reticence are examined here with context provided by the Mexican hedging programme, which incorporates financial incentives to spur adoption. Applying representative data for corn to a well-known analysis of the hedging decision suggests that limited participation may reflect rational calculation rather than farmer ‘inertia’. A policy implication is that permanent access subsidies are difficult to justify from the national perspective.

KW - farmers

KW - hedging incentives

KW - subsidies

KW - Mexico

M3 - Working paper

T3 - Economics Working Paper Series

BT - Futures for farmers: hedging participation and the Mexican corn scheme

PB - The Department of Economics

CY - Lancaster University

ER -