Do Income Support Programs Impact Producer Hedging Decisions? Evidence from a Cross-Country Comparative

Abstract

This article provides a unique perspective to why U.S. producers’ hedging practices are not consistent with the price-risk management literature. We conduct a formal test of income support program impacts with survey data from South Africa and the United States, which have different producer income support policies. We find that producing in a supported environment (U.S.) decreases hedging for preplanting and preharvest expected yields by 30.39% and 20.03%, respectively. This study raises issues for further inquiry regarding both comparative agricultural lending practices and the relative costs of price-risk management tools.