The profit impacts of risk management tool adoption

Abstract

Purpose

The purpose of this paper is to measure the profit impacts of adopting input and output risk management tools at the farm level.

Design/methodology/approach

The analysis examines three years of farm‐level data from the Agricultural Resource Management Survey (ARMS) that include detailed questions on the adoption of risk management tools. Propensity score matching is used to control for the endogeneity of adoption decisions, and the profit impacts are estimated based on the matched dataset.

Findings

The adoption of input price risk management tools improves farm‐level profits by 13‐17 percent.

Originality/value

This is the first paper which examines the profit impacts of risk management tools while controlling for the endogeneity of adoption.

Citation

Kuethe, T.H. and Morehart, M. (2012), "The profit impacts of risk management tool adoption", Agricultural Finance Review, Vol. 72 No. 1, pp. 104-116. https://doi.org/10.1108/00021461211222178