Cotton producers' use of selected marketing strategies

Olga Isengildina, M. Darren Hudson

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

Few cotton (Gossypium hirsutum L.) producers use futures and options to price their crop despite significant efforts to educate farmers about risk management tools. The purpose of this study is (i) to provide insight on producer use of various marketing strategies, (ii) to determine motivating factors that affect allocation of crop to alternative marketing strategies, and (iii) to analyze share allocation of cotton crop to alternative marketing strategies. Marketing strategies considered in this analysis are cash sales, forward contracting, marketing through pools (cooperatives), and hedging. Data for the study were obtained from the survey of cotton producers conducted in the spring of 2000. Models for share allocations to different strategies are estimated using a seemingly unrelated regression approach. The results of the empirical analysis suggest that hedging with futures and options is positively affected by farm size and leverage and is negatively affected by marketing training, belief in the benefits of pools, and personal marketing preferences. Producers that believe that marketing pools can net them a higher price than they can get themselves are less likely to allocate significant portions of their crop to forward contracting. Allocation of cotton to cash sales is positively affected by government payments and offfarm income and negatively affected by size, belief in the benefits of pools, and perceptions of market efficiency. Share allocation to marketing through pools is positively affected by marketing training, risk aversion, belief in the benefits of pools, and personal marketing preferences, and negatively affected by income from government payments.

Original languageEnglish
Pages (from-to)206-217
Number of pages12
JournalJournal of Cotton Science
Volume5
Issue number4
StatePublished - 2001

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