Agricultural Economics and Development

Agricultural Economics and Development

Factors Affecting the Acceptance of Agricultural Futures Contracts: The Case Study of Rice Farmers in Sari County

Document Type : Original Article

Authors
Kimia Sam Daliri 1
Seyed-Ali Hosseini-Yekani 2
Seyed-Mojtaba Mojaverian 3
1 Ph.D. Student of Agricultural Economics, Shiraz University, Shiraz, Iran
2 Associate Professors of agricultural economics, Sari University of Agricultural Sciences and Natural Resources
3 Associate Professor, Department of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Iran mmojaverian@yahoo.com
10.30490/aead.2018.73552
Abstract
Considering the farmer’s preferences as the main participants of agricultural futures markets affects the success of tradable contracts in these markets. According to the empirical evidences in Iran, one of the most important producers’ preferences about agricultural markets is their financial needs. In this context, the purpose of this study is determining the importance of the financial needs of farmers in the success or failure of futures contracts. The statistical population of this study is rice farmers of Sari County, which 272 farmers were selected through random sampling method as sample. In order to achieve the main purpose of this study, the effects of two variables of “level of understanding of futures markets” and “financing of farmers” as independent latent variables, along with the numbers of middle dependent latent variables on the “level of acceptance of futures contracts” as the main dependent latent variable was investigated using a Covariance Structure Model framework. Based on the results, farmers financing has a significant and positive effect on the level of acceptance of futures contracts. So, it is necessary that future contracts are designed and localized in such a way that in addition to hedging the price risk of producers, their financial risk is also can be hedged.
Keywords
Futures Contracts
Financing
Agriculture
Covariance Structure Model
Lisrel
  1. Abdollahi Ezatabadi, M. and Najafi, B. (2008). Investigating the possibility of participation of farmers and traders in future markets and the optional transaction of agricultural products in Iran (case study of pistachio). Journal of Agricultural Economics and Development, 15(57):105-130. (Persian).
  2. Abdollahi, M. (2006). Investments and challenges of the financial market in the agricultural sector. Ravand, 49:169-200. (Persian).
  3. Ai, D. (2012). Hedging effectiveness of constant and time varying hedge ratios using futures heteroshedasticity. Journal of Economics, 31: 307-327.
  4. Amir-nejad, H. and Esmaeili, F. (2009). Investment of the economic potential of recton cultivation as a second cultivation in mazandaran province. 6th National Conference of Agricultural Economics. (Persian).
  5. Arab Mzar, A. and Khoda Rahmi, R. (1999). Main features of rural financial market in Iran. Journal of Agricultural Economics and Development, 26:46-60. (Persian).
  6. Azar, A. (2002). Path analysis and causation in management science. Journal of Majtamae Aali Ghom, 15:59-96. (Persian).
  7. Bekkerman, A. and Tejeda, H. A. (2013). Revisiting the determinants of futures contracts: the curios case of distillers' dried grains. Confeence on Applied Commodity Price Analysis, NCCC_134.
  8. Bielza, M., Conte, C., Dittmann, CH., Gallego, J. and Stroblmair, J. (2008). Agricultural insurance schemes. Institute for the Protection and Security of the Citizen, Agriculture and Fisheries Unit.
  9. Black, D. G. (1986). Success and failure of futures contracts: theory and empirical evidence. Monograph Series in Finance and Economics, Graduate School of Business, New York University.
  10. Brorsen, W. and Fofana, N. F. (2001). Success and failure of agricultural futures contracts. Journal of Agribusiness, 19: 129-145.
  11. Chizari, A. (2003). The introduction of agriculture in the Iran mercantile exchange. Agriculture and Development,11 (41 -42): 12-42. (Persian).
  12. Cochran, C.B. (1977). Sampeling technique. New York: John Wiley.
  13.  Fakkah Roodheshi, B., Shahnoushi, N., Mohammadi, H., Mirzapour, A. and Doroondish, A. (2012).The role of the Iranian commodity market in determining the price of agricultural products by using network analysis (ANP). Journal of Agricultural Economics, 2(6):205-226. (Persian).
  14. Ghasemi. V. (2011). Structural equation modeling in social research using AMOS graphics. Jame-Shenasan Publications.  (Persian).
  15. Gray, R.W. (1966). Why does futures trading succeed or fail: an analysis of selected commodities. In Futures Trading Seminar, 3: 115-137.
  16. Habibi, A. (2012) .Structural equation modeling and factor analysis (LISREL Software Training). Tehran: Jahad-Daneshgahi Publications. (Persian).
  17. Homan, H. A. (2015). Structural equation modeling using LISREL software. Organization for the Study and Compilation of Humanities Books of Universities Publications. (Persian).
  18. Hosseini Yekani, S.A. and Zibai, M. (2007). Determining the specifications of agricultural futures contracts in Iran (case study of corn ). Journal of Agricultural Economics and Development (6th National Conference of Agricultural Economics), 3:125-138. (Persian).
  19. Hosseini Yekani, S.A. and Zibai, M. (2010). Determining goods stuitable for swap in the future market (case study: Iran's crop products). Journal of Agricultural Economics and Development, 3(24):268-278. (Persian).
  20. Jaccard, J. and Choi, K.W. (1996). LISREL approaches to stage university paper interction effects in multiple regression. Social Sciences, pp. 7-114.
  21. Joreskog, K. and Sorbom, D. (1996). LISREL 8: user’s reference guide. 2nd Lincolnwood: Scientific Software International.
  22. Kalantari, Kh. (2014). Structural equation modeling in socio-economic research (with LISREL and SIMPLIS Program). Saba Culture Publications. (Persian).
  23. Kline, R. B. (1998). Principles and practice of structural equation modeling. NY: Guilford Press.
  24. Long, J. S. (1983). covariance structure models: an introduction to LISREL. Beverly Hills, CA: Sage.
  25. Meuwissen, M.P.M., Huirne, R.B.M. and Hardaker, J.B. (2001). Risk and risk management: an empirical analysis of Dutch livestock farmers. Livestock Production Science, 69: 43-53.
  26. Pennings, J. M. E. and Leuthold, R. M. (2000). The role of farmers’behavioral attitude and heterogeneity in futures contrast usage. Amer. J. Agr. Econ., 82(4). 908-919.
  27. Pennings, J. M. E. and Leuthold, R. M. (2001). Commodity futures contract viability: a Multidisciplinary approach. Proceedings of the NCR-134. Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management. (http://ww.farmdoc.uiuc.eda/ncc134)..
  28.  Powers, M. J. (1967). Effects of contract provisions on the success of a futures contract. Journal of Farm Economics, 49: 833-843.
  29. Rashid, S., Winter-Nelson, A. and Garcia, P. (2010). Purpose and potential for commodity exchanges in African economies. IFPRI Discussion Paper 01035. Washington, DC: International Food Policy Research Institute.
  30.  Ray, P.K. (1967). Agricultural insurance, principle and organization and application to developing countries. FAO, Rome, Peramon Press, pp. 12-13.
  31. Sabbagh Kermani, M. and Azizi, F. (2003). Analysis of the effects on the economy and the agricultural sector's commodity exchange. Agricultural and Development Economics, 11 (41 -42):91-115. (Persian).
  32.  Silber, W.L. (1981). Innovation, competition, and new nontract design in futures markets. Journal of Futures Markets,1: 123-155.
  33. Sissiel, M. (2009). The future market in agriculture products and an avulation of the attitude of farmers. In Futures Trading Seminar.
  34. Tashjian, E. (1995). Optimal futures contract design. Quart. Rev. Econ. Fin., 35: 153-162.
  35. www. jkmaz.ir
  36. www.maj.ir
  37. Yaghobi, V. and Torkamani, J. (2003). Investigation and comparison of distributed and non-formulated monetary segments in the rural financial market: defective sector and non-reformed market modification. Agricultural Bank Journal, 2:115-150. (Persian).
  38. Yaron, J., Piperk, y. and Benjamin, M. D. (2002). Rural financing: topic, design and excellence. (Translated by Reza Hosseini). Applied Agricultural Science Publications. (Persian).