Farmer decisions about selling wheat and managing wheat price risk in Australia

Making farm decisions is difficult, especially making decisions about selling and pricing wheat in deregulated supply chains. This study, conducted prior to export deregulation, sought to identify which factors were important to northern New South Wales (NSW) wheat growers when they were making decisions about wheat selling and price risk, under production and market uncertainty. Key questions were about how they make these decisions and the implications, particularly for larger-sized farmers, merchants, end-users, bankers, advisors and trainers. The research aim was to test the behaviour of users and non-users of five selling methods and six pricing-hedging strategies against eighteen management and seventeen risk attitude-adoption questions. Responses of growers were polarised in behavioural traits such as adoption flexibility, decision-support, the achievement of realistic target prices, and whether or not growers hedged-forward priced. There was no loyalty evident to the selling or pricing method except perhaps for speculative storage, which is a characteristic activity in deregulated supply chains. Reliance on a particular selling method was only apparent for users of cash sales at harvest-time. Data-information and market analysis were only very important to users when there were cash settlement outcomes. Perceptual questions relating to risk attitude were not helpful. The findings from this research will assist understanding of farmer decision-making. Information about growers’ decision processes on wheat selling and pricing will be helpful to supply chain intermediaries and service personnel in improving the targeting and alignment of growers. More research is required on the cross-usage of different selling-pricing methods, the interdependence between discretionary costs of production and selling-pricing decisions, how speculative storage compares with on-farm rental storage of pre-sold product that integrates the farmer with the supply chain, and how speculative storage affects cash flow and debt repayment.