Assessing PNW Price Behavior to Enhance Price Risk Management for Agricultural Producers and Handlers of Grain
Given the changing environment for agriculture (including globalization and revised farm policy programs), marketing and risk management at the producer level have taken on an increasing level of importance. Assessments of risk management strategies need to include the new risk management tools (examples include new and modified crop insurance products and new futures market instruments) as they become available. The assessment of marketing and associated management tools for Idaho and PNW grain producers needs to involve three broad areas. The first area involves determining how new risk management tools fit into existing marketing programs for producers of traditional agricultural commodities, especially the grains complex. Grain producers have historically relied heavily on government programs and market-based instruments (forward contracts,
futures markets, etc.) for price risk management. The second area relates to a better understanding of basis behavior for the PNW region. The third area of focus is to assess the needs and role of grain merchants and their activities for enhancing the ability of producers to market grain more effectively. Preliminary work by the US Department of Agriculture provides a strong indication that significant regional variation exists regarding the effectiveness and utilization rates of alternative marketing strategies. Research needs to have a regional orientation to recognize differences in commodity emphasis and risk exposure. Thus, it is important to recognize that strategy evaluation needs to focus specifically on producers in Idaho and the Pacific Northwest region.