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Article
Publication date: 26 August 2014

Marianne Lefebvre, Dimitre Nikolov, Sergio Gomez-y-Paloma and Minka Chopeva

The purpose of this paper is to analyze the determinants of agricultural insurance adoption in Bulgaria, using a purpose-built survey of 224 farmers interviewed in 2011…

Abstract

Purpose

The purpose of this paper is to analyze the determinants of agricultural insurance adoption in Bulgaria, using a purpose-built survey of 224 farmers interviewed in 2011. The insurance decision is analyzed conjointly with other risk management decisions on the farm such as having contracts with retailers or processors, diversifying farm activities and using irrigation.

Design/methodology/approach

The agricultural insurance sector in Bulgaria is presented in the broader context of the transition to a market-oriented economy and integration of Bulgarian agriculture into the EU Common Agricultural Policy. The recent developments on the determinants of farm insurance adoption in the agricultural economics and finance literature are discussed. A multivariate probit model is used in order to determine the factors explaining the adoption or non-adoption of various risk management tools by the surveyed farmers, including farm insurance.

Findings

The authors find that farmers with diversified activities, using irrigation or having contracts with retailers or processors, are more likely to adopt insurance, after controlling for farms and farmers’ structural characteristics. Additionally, the authors find that the main characteristics distinguishing farmers who purchase agricultural insurance from non-users are farm size and farm location. The existence of strong regional effect suggests the importance of adapting the insurance products to the different regional contexts in Bulgaria.

Originality/value

This paper contributes to the (limited) literature on agricultural insurance adoption in transition countries, currently shifting from a system where compensation against natural hazards tended to come from a State damage mitigation fund, inherited from the centrally planned governments to private and voluntary agricultural insurance. This research provides a unique data source on the Bulgarian case study.

Details

Agricultural Finance Review, vol. 74 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 26 July 2013

Xuan Shen and Valentina Hartarska

The purpose of this paper is to estimate the impact of financial derivatives on profitability in agricultural banks. Agricultural banks are new to the derivatives market…

5246

Abstract

Purpose

The purpose of this paper is to estimate the impact of financial derivatives on profitability in agricultural banks. Agricultural banks are new to the derivatives market and are unlikely to use financial derivatives for risk speculation. Thus, the paper also provides evidence on the effectiveness of financial derivatives as a risk management tool in small commercial banks.

Design/methodology/approach

The authors use call report data from Federal Reserve Bank of Chicago for 2006, 2008 and 2010 to estimate an endogenous switching model to evaluate how profitability of derivatives user and non‐user agricultural banks is affected by different risk factors. This approach allows banks' endogenous choices to use financial derivatives to be accounted for, and to build a counterfactual analysis – what user banks' profitability would have been if they did not participate in the derivatives activities.

Findings

Results indicate that risk management through financial derivatives in agricultural banks is effective and profitability of derivatives user agricultural banks is less affected by credit risk and interest risk in the sample period. Derivatives' activities have improved agricultural banks' profitability and these impacts were increasing over years. In particular, in 2010 without use of derivatives, user banks would have had one‐third lower profitability.

Originality/value

This research is the first to study the role of derivatives in agricultural banks and also provides empirical evidence on the effectiveness of risk management through financial derivatives in agricultural banks.

Article
Publication date: 25 May 2012

Edwin Muchapondwa and Thomas Sterner

The purpose of this paper is to investigate whether community‐based wildlife conservation can potentially be added in rural farmers’ investment portfolio to diversify and…

Abstract

Purpose

The purpose of this paper is to investigate whether community‐based wildlife conservation can potentially be added in rural farmers’ investment portfolio to diversify and consequently reduce agricultural risk.

Design/methodology/approach

The correlation coefficient is computed from national data on the rates of return on agricultural production and wildlife conservation, to find out whether wildlife conservation is a feasible hedge asset.

Findings

The correlation coefficient between the returns to agricultural production and wildlife conservation for the period 1989‐1999, for which data exist for both activities, is inferior to unity indicating that rural farmers could use wildlife conservation to reduce the risk they face by engaging in agricultural production only.

Research limitations/implications

Data on communal agricultural production and community‐based wildlife conservation potentially suffer from at least three limitations. First, wildlife is a unique resource that does not require the usual cash investment to acquire and as such the rates of return on wildlife conservation will likely be overstated. Second, some benefits from wildlife are public and non‐monetised; this results in depressed rates of return on wildlife conservation. Lastly, both the data on agricultural production and wildlife conservation are likely to understate physical and human capital investments; this potentially results in abnormally high rates of return.

Practical implications

Even though the paper makes a case for community‐based wildlife conservation at a national level, the benefits of diversification into wildlife conservation are likely to be high only in those rural areas that can sustain wildlife populations sufficient to generate adequate returns from wildlife activities such as tourism, trophy hunting, live animal sales and meat cropping.

Originality/value

This paper empirically investigates whether the risk that rural farmers face could potentially be managed through diversification into community‐based wildlife conservation and provides paramount evidence that wildlife conservation is a hedge asset in rural Zimbabwe. More investment in community‐based wildlife conservation would also help efforts to conserve wildlife.

Details

Journal of Agribusiness in Developing and Emerging Economies, vol. 2 no. 1
Type: Research Article
ISSN: 2044-0839

Keywords

Article
Publication date: 28 November 2022

Prateek Kumar Tripathi, Chandra Kant Singh, Rakesh Singh and Arun Kumar Deshmukh

In a volatile agricultural postharvest market, producers require more personalized information about market dynamics for informed decisions on the marketed surplus…

Abstract

Purpose

In a volatile agricultural postharvest market, producers require more personalized information about market dynamics for informed decisions on the marketed surplus. However, this adaptive strategy fails to benefit them if the selection of a computational price predictive model to disseminate information on the market outlook is not efficient, and the associated risk of perishability, and storage cost factor are not assumed against the seemingly favourable market behaviour. Consequently, the decision of whether to store or sell at the time of crop harvest is a perennial dilemma to solve. With the intent of addressing this challenge for agricultural producers, the study is focused on designing an agricultural decision support system (ADSS) to suggest a favourable marketing strategy to crop producers.

Design/methodology/approach

The present study is guided by an eclectic theoretical perspective from supply chain literature that included agency theory, transaction cost theory, organizational information processing theory and opportunity cost theory in revenue risk management. The paper models a structured iterative algorithmic framework that leverages the forecasting capacity of different time series and machine learning models, considering the effect of influencing factors on agricultural price movement for better forecasting predictability against market variability or dynamics. It also attempts to formulate an integrated risk management framework for effective sales planning decisions that factors in the associated costs of storage, rental and physical loss until the surplus is held for expected returns.

Findings

Empirical demonstration of the model was simulated on the dynamic markets of tomatoes, onions and potatoes in a north Indian region. The study results endorse that farmer-centric post-harvest information intelligence assists crop producers in the strategic sales planning of their produce, and also vigorously promotes that the effectiveness of decision making is contingent upon the selection of the best predictive model for every future market event.

Practical implications

As a policy implication, the proposed ADSS addresses the pressing need for a robust marketing support system for the socio-economic welfare of farming communities grappling with distress sales, and low remunerative returns.

Originality/value

Based on the extant literature studied, there is no such study that pays personalized attention to agricultural producers, enabling them to make a profitable sales decision against the volatile post-harvest market scenario. The present research is an attempt to fill that gap with the scope of addressing crop producer's ubiquitous dilemma of whether to sell or store at the time of harvesting. Besides, an eclectic and iterative style of predictive modelling has also a limited implication in the agricultural supply chain based on the literature; however, it is found to be a more efficient practice to function in a dynamic market outlook.

Details

Benchmarking: An International Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1463-5771

Keywords

Book part
Publication date: 26 January 2022

Jerry V. Graves

Agricultural and fishery disasters are rather obscure emergency management research topics. However, the Food and Agriculture Sector is one of only 16 critical…

Abstract

Agricultural and fishery disasters are rather obscure emergency management research topics. However, the Food and Agriculture Sector is one of only 16 critical infrastructure sectors included in the Robert T. Stafford Disaster Relief and Emergency Assistance Act of 1988, and the sector is a vital component of the United States economy. As climate change continues to increase the frequency and severity of agricultural and fishery disasters, the Food and Agricultural Sector must adapt to and cope with unprecedented levels of risk. This chapter provides an overview of federal agricultural and fishery disaster policy and explores whether such policies are consistent with Jerroleman’s (2019)principles of just recovery.

Details

Justice, Equity, and Emergency Management
Type: Book
ISBN: 978-1-83982-332-9

Keywords

Article
Publication date: 18 May 2012

Sonit Singla and Mahim Sagar

The purpose of this paper is to suggest an integrated risk management service for agriculture, by identifying different risk management practices that may be offered in…

4065

Abstract

Purpose

The purpose of this paper is to suggest an integrated risk management service for agriculture, by identifying different risk management practices that may be offered in conjunction with crop insurance, to address the various problems and challenges being faced by farmers and by insurance companies.

Design/methodology/approach

The research is based on an inductive approach of developing theory from case studies using within‐case and cross‐case analysis. However, apart from exploring different elements from case studies, some of the existing concepts have been reviewed from the literature for their application in agricultural risk management.

Findings

An integrated framework for risk management in agriculture has been developed by inductively exploring the various elements that may be successfully interlinked with the crop insurance to tackle the various agricultural risks more efficiently and effectively.

Practical implications

This paper can act as a basis for new product development in agricultural risk management through the use of this integrated approach of risk management and the different elements that have been identified to improve the effectiveness of crop insurance.

Originality/value

This paper fulfils the identified need to develop a framework for an integrated risk management in agriculture.

Details

The Journal of Risk Finance, vol. 13 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

Open Access
Article
Publication date: 11 May 2020

Marcelo José Carrer, Rodrigo Lanna Franco da Silveira, Marcela de Mello Brandão Vinholis and Hildo Meirelles De Souza Filho

The purpose of this study is to investigate the determinants of agricultural insurance adoption by farmers of the state of São Paulo, Brazil.

1602

Abstract

Purpose

The purpose of this study is to investigate the determinants of agricultural insurance adoption by farmers of the state of São Paulo, Brazil.

Design/methodology/approach

Primary data from the 2015/2016 crop season was collected from a sample of 175 farmers. Logit econometric models were applied to identify the variables that affect the probability of agricultural insurance adoption.

Findings

The empirical results show that the education level, access to technical assistance, use of management tools and farm size positively affect the probability of adopting agricultural insurance. In addition, farmers who produce soybean and/or corn are more likely to use insurance. On the other hand, the higher the farmers’ propensity to take risk the lower the likelihood of using insurance.

Research limitations/implications

The empirical analysis is based on cross-sectional data of a sample of 175 farmers of the state of São Paulo. The use of panel data with a larger sample of farmers, considering a period of years, could provide additional information.

Originality/value

To the best of the knowledge, this is the first empirical analysis about determinants of agricultural insurance adoption by Brazilian farmers, considering behavioral factors. The findings provide useful insights for policymakers in formulating risk management programs in the Brazilian agricultural markets. A better understanding about the determinants of insurance adoption is also relevant for private companies that sell insurance to farmers. Therefore, the paper may contribute with the diffusion of rural insurance as risk management tool in Brazilian agriculture.

Details

RAUSP Management Journal, vol. 55 no. 4
Type: Research Article
ISSN: 2531-0488

Keywords

Article
Publication date: 2 November 2015

Erwin Wauters, Yann de Mey, Frankwin van Winsen, Steven Van Passel, Mark Vancauteren and Ludwig Lauwers

Building on the risk balancing theory and on recent discussions the appropriateness of using farm income maximization as behavioural assumption, this paper extends the risk

Abstract

Purpose

Building on the risk balancing theory and on recent discussions the appropriateness of using farm income maximization as behavioural assumption, this paper extends the risk balancing framework by accounting for business-household interactions. The purpose of this paper is to theoretically introduce the concept of farm household risk balancing, a theoretical framework in which the farm household sets a constraint on the total household-level risk and balances farm-level and off-farm-level risk.

Design/methodology/approach

The paper argues that the risk behaviour of farmers is better understood by considering risk at the household level. Using an analytical framework, equations are derived linking the farm activities, off-farm activities, consumption and business and private liquidity.

Findings

The framework shows that a farm household that wants to minimize the risk that total household cash flow falls below consumption needs, may exhibit a wide variety of behavioural responses to changes in the policy and economic environment.

Social implications

The framework suggests multiple ways for policy makers and individual farmers to support risk management.

Originality/value

Risk management is at the core of the agricultural policy and it is of paramount importance to be able to understand behavioural responses to market and policy instruments. This paper contributes to that by suggesting that the focus of current risk analysis and management studies may be too narrowly focused at the farm level.

Details

Agricultural Finance Review, vol. 75 no. 4
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 30 October 2018

Bo Yan, Jiwen Wu and Fengling Wang

The purpose of this paper is to establish an effective risk assessment approach based on the conditional value-at-risk (CVaR) in the agricultural supply chain.

Abstract

Purpose

The purpose of this paper is to establish an effective risk assessment approach based on the conditional value-at-risk (CVaR) in the agricultural supply chain.

Design/methodology/approach

This study analyzes and assesses the risks of breeding, processing, transportation and warehousing in the agricultural supply chain. The ordered weighted averaging operator is used to sort risk control factors according to their importance and determine the main risk indicators of an enterprise. The CVaR model is utilized to establish the risk loss function, and an improved genetic algorithm is employed to identify the optimal risk control portfolios in the case of the smallest risk loss.

Findings

Based on the approach, the optimal combination of risk control to minimize risk losses is determined. Results show that the proportion of capital investment in risk control differs at three confidence levels, and a large amount of money needs to be invested in the production process at the source. Thus, any attempt to control the risks inherent in the agricultural supply chain must begin with the production process at the source.

Originality/value

Supply chain risk management has become increasingly important and significant to the operation and production of enterprises in recent years. The proposed method to assess the risk in the agricultural supply chain can benefit managers in making smart decisions to control total risk.

Details

Management Decision, vol. 57 no. 7
Type: Research Article
ISSN: 0025-1747

Keywords

Book part
Publication date: 29 July 2020

Stefano Grando, Fabio Bartolini, Isabelle Bonjean, Gianluca Brunori, Erik Mathijs, Paolo Prosperi and Daniele Vergamini

This chapter opens the second part of the Volume, focusing on the small farms' role and dynamics within the evolving food system. Assessing small farmers' actual and…

Abstract

This chapter opens the second part of the Volume, focusing on the small farms' role and dynamics within the evolving food system. Assessing small farmers' actual and potential contribution to the change towards a sustainable food and nutrition security requires a deep understanding of their strategic decision-making processes. These processes take place in a context highly conditioned by internal and external conditions, including the complex relations between farm and household, which are mapped and described. Building on an adaptation of Porter's model (Porter, 1990), the chapter investigates how farmers, given those conditions, define their strategies (in particular their innovation strategies) aimed at economic and financial sustainability through a multidisciplinary analysis of scientific literature. Internal conditions are identified in the light of the Agricultural Household Model (Singh & Subramanian, 1986) which emphasizes how family farming strategies aim at combining business-related objectives, and family welfare. Then, a comprehensive set of external conditions is identified and then grouped within eight categories: ‘Factors’, ‘Demand’, ‘Finance and Risk’, ‘Regulation and Policy’, ‘Technological’, ‘Ecological’, ‘Socio-institutional’ and ‘Socio-demographic’. Similarly, six types of strategies are identified: ‘Agro-industrial competitiveness’, ‘Blurring farm borders’, ‘Rural development’, ‘Risk management’, ‘Political support’ and ‘Coping with farming decline’.

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