Agency Theory, Futures Markets and Risk Shifting in Commodity Marketing Channels

J.K.M. Kuwornu, W.E. Kuiper, J.M.E. Pennings, M.T.G. Meulenberg

Research output: Chapter in Book/Report/Conference proceedingConference paper

Abstract

This paper applies agency theory to access risk shifting between the principal (marketing firms) and the agent (farmers) in a food marketing channel. It compares the case in which there is a futures market available for the risk-averse agents with the case in which there is no futures trading. The empirical results regarding the Dutch ware potato marketing channel reveal that risk shifting from marketing firms to farmers, possibly as a consequence of chain reversal, can be better managed to farmers if they trade on a futures market. This demonstrates the hedging role of futures contracts as a price-risk management instrument. Keywords: futures markets, agency theory, risk shifting, chain reversal, commodity marketing channels
Original languageEnglish
Title of host publicationDynamics in Chains and Networks. Proceedings of the sixth International Conference on Chain and Network Management in Agribusiness and the Food Industry, Wageningen, 27-28 May 2004
Place of PublicationWageningen
PublisherWageningen Academic Publishers
Pages510-517
ISBN (Print)9789076998404
Publication statusPublished - 2004
Event6th International Conference on Chain and Network Management in Agribusiness and the Food Industry -
Duration: 27 May 200428 May 2004

Conference

Conference6th International Conference on Chain and Network Management in Agribusiness and the Food Industry
Period27/05/0428/05/04

Keywords

  • food industry
  • marketing channels
  • futures trading

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