Farmer Forward Pricing Behavior: Evidence from Marketing Clubs
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Numerous studies have investigated how farmers should use forward pricing markets, but only limited research exists on how farmers actually use these markets. This study relies on data from a real-time forward pricing game employed by Maryland grain marketing clubs from 1994 through 1998. Hypotheses are tested regarding the consistency of farmer behavior with the research literature on hedging. Findings indicate that farmers do not achieve price enhancement, a result consistent with the efficient market hypothesis. However, pricing behavior does not conform to the implications of efficient market models in a number of respects, suggesting farmers may form different expectations than those conveyed by forward prices.