Human Capital, Producer Education Programs, and the Adoption of Forward-Pricing Methods

Using a sample of 509 Kansas producers, we evaluate factors affecting adoption of forward pricing methods. We focus on producers ' human capital accumulation and its effect on adoption of forward-pricing techniques. Probit models are employed to evaluate producers ' participation in educational programs and their forward-pricing adoption decisions. Tobit models are employed to evaluate individual levels of adoption of these techniques in the marketing of wheat, corn, grain sorghum, soybeans, and cattle. Key words: forward pricing, human capital, technology adoption. Because price risk is pervasive in agricultural markets, its management has become an impor-tant issue for agricultural producers. Price vari-ability is a significant component of overall profit variability. Agricultural lenders prefer producers who secure protection against price fluctuations (Harris and Baker). Producers have numerous ways to manage price risk, including futures hedges, forward contracts, and options markets. Numerous studies have established the effectiveness of these methods in reducing price risk (Berek; Miller and Kahl; and Schroeder and Hayenga). Despite the pervasiveness of price risk and much research suggesting ways to manage the risk, relatively few producers use forward and futures markets. In surveys of 1972 Kansas grain producers, Hill found that only 4 % had ever hedged and 12 % had ever forward con-tracted. In a survey of 353 Ohio farms in 1986, Asplund, Forster, and Stout found 42 % forward contracted and 7 % hedged. Public and private interests have established many programs to educate farmers about risk management. Publi