Factors influencing hedging decision: evidence from Brazilian citrus growers

Abstract

The purpose of this study was to analyse the hedging behaviour of 98 citrus growers from the State of Sao Paulo, Brazil. Marketing behaviour was modelled as a choice between spot market, short and long-term forward contracts. A multinomial logistic regression model was used to evaluate the role of behavioural, personal and managerial variables in the choice. Results indicated that the factors which explain the use of forward contracts by citrus growers are the following: risk propensity; trade with juice processing companies; farming diversification; overconfidence in management; participation in pools; use of management tools; and technical assistance. The results can be useful for farmers, policymakers, government agencies, traders and extension agents.