SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

This study proposed a theoretical framework for analyzing farm capital structure choice. The theoretical model recognizes that the costs of debt are endogenously determined which in turn reflect the degree of credit constraint faced by individual borrowers. Based on the proposed model, we derived the impacts of different determinants on capital structure choice analytically. The theoretical inferences are further tested with empirical data. Methodologically, we proposed a fixed-effect quantile regression procedure to estimate the impacts of determinants at different ranges of leverage. The effects of determinants are discussed in the empirical application.

Modeling Agricultural Risk, Risk Preferences and Perceptions

Palavras-chave: Capital Structure; Cost of Debt; Credit Constraint; Quantile Regression; Agricultural Finance.

Ano: 2008

URL: http://purl.umn.edu/6130

Guan, Zhengfei; Wu, Feng.

Forecasting Volatilities of Corn Futures at Distant Horizons

Palavras-chave: Risk and Uncertainty.

Ano: 2011

URL: http://purl.umn.edu/103801

Accurately forecasting volatility at distant horizons is critical for managing long-term risk in agriculture. Given the poor performance of GARCH-type models at long-term volatility forecast, we develop a risk-adjusted implied volatility, which adjust the risk-neutral implied volatility by correctly accounting for the volatility risk premium. The paper evaluates the performance of the new implied volatility in the corn futures market relative to two alternative forecasts- a three-year moving average forecast and a naïve forecast. The finding from the study is that the new implied volatilities have at least as well as or stronger predictive power than alternative predicting approaches.

The Volatility Spillover Effects and Optimal Hedging Strategy in the Corn Market

Palavras-chave: Risk-neutral; Volatility risk premium; Forecast; Corn options; Demand and Price Analysis.

Ano: 2010

URL: http://purl.umn.edu/61316

This article examines the volatility spillovers from energy market to corn market. Using a volatility spillover model from the finance literature, we found significant spillovers from energy market to corn cash and futures markets, and the spillover effects are time-varying. The business cycle proxied by crude oil prices is shown to affect the magnitude of spillover effects over time. Based on the strong informational linkage between energy market and corn market, a cross hedge strategy is proposed and its performance studied. The simulation outcomes show that compared to alternative strategies of no hedge, constant hedge, and GARCH hedge, the cross hedge does not yield superior risk-reduction performance.

Testing for Volatility Changes in Grain Markets

Palavras-chave: Volatility Spillover; GARCH; Optimal Hedge Ratio; Energy Price; Corn Price; Risk and Uncertainty.

Ano: 2009

URL: http://purl.umn.edu/49453

Contract Designs and Participation in the Conservation Reserve Program in the Era of Biofuel Production

Wu, Feng.

We use newly nonparametric volatility measures and break techniques to estimate common breaks across grain futures over the recent ten years. Our results show one structural change in realized volatilities occurred in 2006 for corn and in 2007 for soybean. But the date difference between them cannot be negligible. We disaggregate the realized volatilities into a continuous component and a jump part and found the source of structural beak in realized volatilities is from jumps.

Tipo: Working or Discussion Paper

Palavras-chave: Structural change; Grain; Volatility measures; Financial Economics.

Ano: 2011

URL: http://purl.umn.edu/103388

This article has presented a farmer decision making model of participation in the Conservation Reserve Program (CRP) under the current rising bio-fuel production. The decision is specified as an optimal stopping problem and farming return is assumed following stochastic process with the uncertainty of growth rate. Nonliear Kalman filter approach is used to continuously upgrade the new information and estimate the random growth rate with the minimum error. The problem is formulated as a linear complementarity problem that is solved numerically using a fully implicit finite difference method. It is found that participation in the CRP is sensitive to financial incentive, and shortening contract length is also an effective method to promote land enrollment in...

Specification and estimation of heterogeneous risk preference

Palavras-chave: Conservation Reserve Program; Nonlinear Kalman Filter; Farmer Participation; Real Option; Environmental Economics and Policy.

Ano: 2009

URL: http://purl.umn.edu/51646

Guan, Zhengfei; Wu, Feng.

In this paper we specify and estimate producers’ risk preference using farm data. We allow heterogeneous risk preference across individuals and propose a specification to model the heterogeneity. We base farmers’ decision making on a utility maximization framework and incorporate both market and production risk in farmers’ decision making. We do not assume any specific utility function or distribution of risk. The empirical application to farm level production data shows that risk preference does vary among individuals; demographic and institutional factors have significant effect on producers’ risk attitude.

Supporting Cellulosic Ethanol Biomass Production and its Impact on Land Use Conversion

Palavras-chave: Risk Preference; Heterogeneity; Production Risk; Price Risk; Demographics; Subsidy; GMM; Agricultural Finance; Crop Production/Industries; Production Economics; Risk and Uncertainty.

Ano: 2009

URL: http://purl.umn.edu/51804

One of the problems facing the cellulosic ethanol industry is the cellulose material supply. The U.S. forestlands have considerable potential to become one of the main sources of biomass to meet the 2022 renewable fuel target. Focusing on the land exiting the Conservation Reserve Program (CRP), the article finds that few landowners are willing to convert their land to forestland after the CRP contract is expired. Our econometric estimates show the choice decision is responsive to net returns of land use alternatives, especially cropland. Two policy initiatives are suggested to provide direct incentives for land use change. The nested logit estimates are used to simulate landowners‘ responses to policy mechanism. The results show that subsidies can...

Pricing Commodity Options under Markov Regime Switching GARCH Processes

Palavras-chave: Cellulosic Ethanol; Biomass; Land Use; The CRP; Forestland; Environmental Economics and Policy.

Ano: 2009

URL: http://purl.umn.edu/49451

MS-GARCH option pricing model proposed in this paper accommodates new features of corn futures price movement in the era of biofuel production and therefore is more general. Our findings show that this new model will outperform models used in the existing literature both for the in-sample and out-of-sample option pricing fit.