Hedging crop yield with exchange-traded weather derivatives

2016 ◽  
Vol 76 (1) ◽  
pp. 172-186 ◽  
Author(s):  
Rui Zhou ◽  
Johnny Siu-Hang Li ◽  
Jeffrey Pai
Keyword(s):  
Crop Yield ◽  
Agricultural Sector ◽  
Geographical Location ◽  
Weather Derivatives ◽  
Yield Model ◽  
Hedging Strategy ◽  
Content Type ◽  
Hedging Effectiveness ◽  
Optimal Hedging ◽  
The Impact

Purpose – The application of weather derivatives in hedging crop yield risk is gaining more interest. However, the further development of weather derivatives – particularly exchange-traded – in the agricultural sector has been impeded by concerns over their hedging performance. The purpose of this paper is to develop a new framework to derive the optimal hedging strategy and evaluate hedging effectiveness. Design/methodology/approach – This framework incorporates a stochastic temperature model, a crop yield model, a risk-neutral pricing method and a profit optimization procedure. Based on a large number of simulated scenarios, the authors study crop yield hedge for a future year. The authors allow the hedger to choose from different types of exchange-traded weather derivatives, and examine the impact of various factors on the optimal hedging strategy. Findings – The analysis shows that hedging objective, pricing method and geographical location of the hedged exposure all play important roles in choosing the best hedging strategy and assessing hedging effectiveness. Originality/value – This framework is forward-looking, because it focusses on the crop yield hedge for a future year rather than on the historical hedging effectiveness often studied in literature. It utilizes the most up-to-date information related to temperature and crop yield, and hence produces a hedging strategy which is more relevant to the year under consideration.

Determinants of opportunism in Uganda’s manufacturing sector:a comparison of two sectors

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sarah Eyaa ◽  
Ramaswami Sridharan ◽  
Suzanne Ryan
Keyword(s):  
Information Sharing ◽  
Agricultural Sector ◽  
Environmental Uncertainty ◽  
Manufacturing Firms ◽  
Cross Sectional Survey ◽  
Cross Sectional ◽  
Power Asymmetry ◽  
Content Type ◽  
Manufacturing Sectors ◽  
The Impact

Purpose The purpose of this paper is to propose a conceptual model investigating the impact of three constructs, environmental uncertainty, power asymmetry and information sharing on opportunism engagement in exchange relationships. Design/methodology/approach Data were collected from procurement or sales managers of 99 manufacturing firms in Kampala, Uganda’s capital using a cross-sectional survey. Hypotheses were tested in both the agricultural and non-agricultural manufacturing sectors using multiple regression runs in the SPSS software. Findings Environmental uncertainty increases opportunism in the agricultural sector whilst power asymmetry increases opportunism in the non-agricultural sector. Across both sectors, information sharing does not have a significant impact on opportunism. Originality/value This paper contributes to a deeper understanding of opportunism in a developing country context by highlighting the contextual factors within the agricultural and non-agricultural manufacturing sectors that influence opportunism engagement under conditions of environmental uncertainty, power asymmetry and information sharing. This paper presents implications for practice and policy to minimise opportunism with the goal of enhancing the participation of Ugandan manufacturing firms in global supply chains.

Does opening high-speed railways affect the cost of debt financing? A quasi-natural experiment

2020 ◽  
Vol 10 (4) ◽  
pp. 473-496
Author(s):  
Hongling Guo ◽  
Keping Wu
Keyword(s):  
High Speed ◽  
Geographical Location ◽  
Debt Financing ◽  
Cost Of Debt ◽  
High Speed Railway ◽  
Content Type ◽  
Financing Cost ◽  
Debt Market ◽  
The Cost ◽  
The Impact

PurposeThis study aims to investigate how opening high-speed railways affects the cost of debt financing based on China's background.Design/methodology/approachUsing panel data on Chinese listed firms from 2008 to 2017, this study constructs a quasi-natural experiment and adopts a difference-in-difference model with multiple time periods to empirically examine the relation between the high-speed railway openings and debt financing cost.FindingsOur results show that opening high-speed railways reduces the cost of debt financing, and this negative correlation is more significant in non-state firms, firms with weaker internal control, and firms that hire non-Big Four auditors. Besides, we explore the impact mechanisms and find that opening high-speed railways improves analyst attention, institutional investor participation, and information disclosure quality, which in turn lowers the cost of debt financing.Research limitations/implicationsThe results imply that the opening of high-speed railways helps to alleviate the information asymmetry and adverse selection between firms and creditors and ultimately reduces the cost of corporate debt financing.Practical implicationsThis paper can inform firms and stakeholders about the impact of opening high-speed railways on debt financing cost: it improves the information environment, reduces the geographical location restrictions of debt financing, ensures the reasonable pricing of corporate debt, and thus promotes the healthy and sound development of the debt market.Originality/valueThis paper provides theoretical support and empirical evidence for the impact of infrastructure construction on the information environment of the debt market in China, which enriches the research on the “high-speed railway economy.” In addition, as an exogenous event, the opening of high-speed railways instantly shortens the time distance between firms and external stakeholders, which gives us a natural environment to conduct empirical research, thus providing a new perspective for financial research on firms' geographical location.

Agricultural sector value chain and government policy in Nigeria: issues, challenges and prospects

2020 ◽  
Vol 11 (3) ◽  
pp. 525-538
Author(s):  
Michael Oluwaseun Olomu ◽  
Moses Clinton Ekperiware ◽  
Taiwo Akinlo
Keyword(s):  
Structural Transformation ◽  
Government Policy ◽  
Value Chain ◽  
Agricultural Sector ◽  
Market Failures ◽  
Agricultural Policies ◽  
Value Addition ◽  
Content Type ◽  
Chain System ◽  
The Impact

PurposeThis paper systematically reviewed the contributions of the recent Nigerian government agricultural policies and the impacts on the agricultural value chain system in line with the structural transformation of the sector and the Nigeria's vision 20:2020. The study also suggest strategies to upgrading various segments of the agricultural value chain and argue that Nigeria's agricultural sector requires huge investments and innovative ideas to increase production and create value addition across the most profitable areas of the value chain.Design/methodology/approachThe authors systematically present evidences and data from the Central Bank of Nigeria (the apex monetary authority of Nigeria) and Nigerian Bureau of Statistics (oversees and publishes statistics for Nigeria) to estimate the impact of Government agricultural policies on the value chains system.FindingsThe study discovers that the various recent government policy interventions to tackle the austere challenges in the agricultural sector are yet to yield much significant solution. Given to the dwindling performance of the sector, the Nigerian agricultural value chain is somewhat affected with systemic and services gaps which underpin the market failures (missing markets and weak markets), although the agricultural value chain has the potential of triggering economic growth in a higher scale with a trickle-down effect to other sectors of the Nigerian economy.Practical implicationsOverall, the findings indicate strategies to upgrading the production and processing segments of the agricultural value chain and argues that Nigeria's agricultural sector requires huge investments and innovative ideas to increase production and create value addition across the most profitable areas of the value chain.Social implicationsThe study proves that enhancing value addition in the agricultural sector is imperative to achieving triple-benefits of increasing productivity by building resilient systems that leverage on finance opportunities, deepening economic inclusive growth and achieving great milestones.Originality/valueThis study is the first attempt to focus on agricultural value chain system in line with the structural transformation and the Nigeria's vision 20:2020.

scholarly journals Impact of the Basel III bank regulation on US agricultural lending

2020 ◽  
Vol 80 (3) ◽  
pp. 321-337 ◽  
Author(s):  
Kevin Nooree Kim ◽  
Ani L. Katchova
Keyword(s):  
Growth Rates ◽  
Banking Sector ◽  
Agricultural Sector ◽  
Global Financial Crisis ◽  
Detailed Examination ◽  
Capital Requirements ◽  
Basel Iii ◽  
Content Type ◽  
The Usa ◽  
The Impact

Purpose Following the recent global financial crisis, US regulatory agencies issued laws to implement the Basel III accords to ensure the resiliency of the US banking sector. Theories predict that enhanced regulations may alter credit issuance of the regulated banks due to increased capital requirements, but the direction of changes might not be straightforward especially with respect to the agricultural loans. A decrease in credit availability from banks might pose a serious problem for farmers who rely on bank credit especially during economic recessions. The paper aims to discuss these issues. Design/methodology/approach In this study, the impact of Basel III regulatory framework implementation on agricultural lending in the USA is examined. Using panel data of FDIC-insured banks from 2008 to 2017, the agricultural loan volume and growth rates are examined for agricultural banks and all US banks. Findings The results show that agricultural loan growth rates have slowed down, but the amount of agricultural loan volume issuance still remained positive. More detailed examination finds that regulated agricultural banks have decreased both the agricultural loan volume and their loan exposure to the agricultural sector, showing a possible sign of credit crunch. Originality/value This study examines whether the implementation of the Basel III regulation has resulted in changes in agricultural loan issuance by US banks as predicted by the lending channel theory.

Regional pacts to facilitate global agriculture trade

2015 ◽  
Keyword(s):  
World Trade ◽  
Agricultural Sector ◽  
Trade Agreements ◽  
Agricultural Trade ◽  
Agricultural Products ◽  
Regional Trade ◽  
Content Type ◽  
Food Standards ◽  
Global Agriculture ◽  
The Impact

Subject The impact of preferential trade agreements on global agricultural trade. Significance Bilateral and regional trade agreements have proliferated since the late 1980s. They account for over 50% of world trade and their share is increasing, according to OECD estimates. These agreements are particularly significant for agricultural trade, principally because this sector has the most to gain from low tariff access to markets. Yet they raise the question of whether such agreements are the most effective instruments for reducing barriers to global agricultural trade. Impacts Agricultural products such as sugar and dairy are likely to continue appearing frequently on the 'sensitive products' list in PTAs. Japan's aversion to opening its agricultural sector represents a major hurdle to the TPP. The European Parliament will probably reject any TTIP agreement that requires abandoning the 'precautionary principle' on food standards.

When informality meets formality: evidence from China

2018 ◽  
Vol 12 (1) ◽  
pp. 184-201 ◽  
Author(s):  
Kun (Michelle) Yang ◽  
Michael J. Pisani
Keyword(s):  
Informal Economy ◽  
Institutional Environment ◽  
Geographical Location ◽  
Business Environment ◽  
Cross Sectional Survey ◽  
Cross Sectional ◽  
Content Type ◽  
Formal Economy ◽  
Structural Inertia ◽  
The Impact

Purpose This study aims to explore “what impact does competition from informal enterprises have on formal firms” within the Chinese economic and business environment. Design/methodology/approach The paper opted for an exploratory study utilizing the cross-sectional survey data “2012 China Enterprise Survey” conducted by the World Bank. The survey is composed of approximately 200 business-related questions across the spectrum of business operations. In all, 2,700 privately owned Chinese firms are included in the logistic regression analysis. Findings Results show the impact of informal firm competition upon formal firms in China are influenced by geographical location, industry sector, ownership profile, governmental ownership, online presence and the extent of obeying labor regulations or the time spent in handling the governmental regulatory environment. There is a competitive and complementary simultaneous intertwined relationship between formal and informal economy. It occurs in a formal economy not fully divorced from the structural inertia of the planned economy as it transitions to a market-based economy. Practical implications This paper extended the assumption of institutional theory and presented it as a dynamic view of the evolution of organizations. It contributes by offering a simultaneous dual relationship between the formal and informal economy. It also adds one more potential feature of populations in the population ecology theory. Originality/value This exploratory paper empirically examines the impacts of informal sector enterprises on formal sectors firms in China and proposes a dual force effect of the informal economy to the formal economy given the current Chinese institutional environment. The study also provides a platform for further research on the interactions between the formal and informal sectors in emerging markets.

Impact of the methods of groundwater access on irrigation and crop yield in the North China Plain

2016 ◽  
Vol 8 (4) ◽  
pp. 613-633 ◽  
Author(s):  
Lijuan Zhang ◽  
Jinxia Wang ◽  
Guangsheng Zhang ◽  
Qiuqiong Huang
Keyword(s):  
Crop Yield ◽  
North China Plain ◽  
North China ◽  
Climate Factors ◽  
Groundwater Use ◽  
Content Type ◽  
The North ◽  
The North China Plain ◽  
Groundwater Markets ◽  
The Impact

Purpose The purpose of this paper is: to track the methods by which farmers access groundwater for irrigation in the North China Plain (NCP); to explore whether climate factors influence farmers’ decisions on the methods of groundwater access for irrigation; and to examine whether the amount of groundwater use for irrigation and crop yield systematically differ across groups of farmers using various methods of groundwater access, and how climate factors affect them. Design/methodology/approach Descriptive statistical analysis and econometric models are used on household survey data collected over several years and county-level climate data. Findings Over the past few decades, a significant share of farmers have switched the methods of groundwater access from collective tubewells to own tubewells or groundwater markets. Farmers who bought water from groundwater markets applied less water to wheat plots than those who had their own tubewells. However, wheat yield was not negatively affected. Both average climate conditions and long-term variations were found to be related to farmers’ choice of methods of groundwater access for irrigation. More frequent droughts and increasingly volatile temperatures both increased the likelihood of farmers gaining groundwater irrigation from markets. Originality/value The analysis results suggest farmers are using groundwater markets to help them adapt to climate change. Applying empirical analysis to identify the impact of the methods by which farmers access groundwater for irrigation on the amount of groundwater use and crop yield will help policy makers design reasonable adaptation policies for the NCP.

Wars, public finances and interest rates for rural lending: evidence from 19th-century Lima

2019 ◽  
Vol 80 (2) ◽  
pp. 153-172
Author(s):  
Luis Felipe Zegarra
Keyword(s):  
Interest Rates ◽  
Agricultural Sector ◽  
Political Instability ◽  
Primary Sources ◽  
Content Type ◽  
Rural Credit ◽  
National Archives ◽  
The Cost ◽  
The Impact

Purpose The purpose of this paper is to analyze the effect of political instability on rural credit in Lima between 1835 and 1865. In particular, it explores the effects of wars on interest rates for the agricultural sector. Design/methodology/approach The paper relies on primary sources for the study of the early credit market of Lima. In particular, the study relies on a sample of more than 800 notarized loans for 1835–1865, collected from the National Archives of Peru, to determine the effect of wars on the cost of credit. Findings The evidence shows that wars increased interest rates on rural loans and that the impact of wars on the cost of credit was greater when the State lacked fiscal resources. Political instability made funding more costly for landlords and farmers, especially in the late 1830s and early 1840s. Originality/value This paper is one of the few historical studies on the role of wars on rural credit in Latin America. It contributes to our understanding of the linkages between political instability and financial development.

How much did the return of rural migrant labor affect China's national economy?

2014 ◽  
Vol 6 (1) ◽  
pp. 38-54
Author(s):  
Wei Jia ◽  
Xiaoyun Liu
Keyword(s):  
Growth Rate ◽  
Financial Crisis ◽  
National Economy ◽  
Computable General Equilibrium ◽  
Agricultural Sector ◽  
Migrant Labor ◽  
Content Type ◽  
Rural Migrant ◽  
The Impact ◽  
China’S Economy

Purpose – What this paper aims to tackle is how much did the return of rural migrant labor during the financial crisis affect China's GDP and the growth rate of the national economy. Design/methodology/approach – This paper constructs a computable general equilibrium (CGE) model and uses data of China's 2007 Input-Output Table to analyze the impact of the return of rural migrant labor on China's economy during the financial crisis. Findings – The results show that the return of rural migrant labor during the financial crisis had substantial impacts on China's economy. The national GDP decreased by about 0.499-1.463 percent, mainly due to the number of rural labor who migrated from the non-agricultural sector to agriculture. Of the major sectors of economy, the manufacturing, construction and other services sectors were the most affected. Originality/value – This paper assesses the impacts of return of rural migrant labor during the financial crisis on China's GDP and the growth rate of the national economy.

Tax policy and farm capital investment: Section 179 expensing and bonus depreciation

2016 ◽  
Vol 76 (2) ◽  
pp. 246-269 ◽  
Author(s):  
James M Williamson ◽  
Sarah Stutzman
Keyword(s):  
Fixed Effects ◽  
Capital Investment ◽  
Agricultural Sector ◽  
Physical Capital ◽  
Cost Recovery ◽  
Farm Income ◽  
Content Type ◽  
Bonus Depreciation ◽  
On Farm ◽  
The Impact

Purpose – The purpose of this paper is to estimate the impact of Internal Revenue Code cost recovery provisions – Section 179 and “bonus depreciation” – on farm capital investment. Design/methodology/approach – The authors construct a synthetic panel of data consisting of cohorts of similar farms based on state and production specialization using the USDA’s Agricultural Resource Management Survey for years 1996-2012. Employing panel data methods, the authors are able to control for time-invariant fixed effects, as well as the effects of past investment on current investment. Findings – The authors estimate statistically significant investment demand elasticities with respect to the Section 179 expensing deduction of between 0.28 and 0.50. A change in bonus depreciation, on average, had little impact on capital investment. Practical implications – The estimates suggest there is a modest effect of the cost recovery provisions on investment overall, but a stronger effect on farms that have more than $10,000 in gross cash farm income. There are other implications for the agricultural sector: the provisions may encourage technology adoption with its associated benefits, such as reduced cost of production and improved conservation practices. On the other hand, the policy could contribute to the growing concentration in production as large commercial farms expand their operated acreage to take advantage of increasingly efficient physical capital. Originality/value – To the authors’ knowledge, this is the first research to use a nationally representative dataset to estimate to impact of Section 179 and “bonus depreciation” on farm investment. The findings provide evidence of the provisions’ impact on farm capital purchases.

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