Futures Markets and Firm Decisions under Price , Production , and Financial Uncertainty

only with price risk (Ward and Fletcher; Peck). Subsequently, research has considered Incorporation of futures markets into the Peck) Subseqently, research has considered theory of the firm under uncertainty has reproduction and price risks (Rolfo), price and ceived considerable attention in risk manrisks (Harris and Baker) and price agement. A theoretical model of optimal firm production, and some dimensions of financial decisions in cash and futures markets conisks (Lutgen and Helmers; Berck). However sidering price, production, and financial risks the financial risk arising from margins have is presented. Production and marketing stratnot been explicitly considered. In his review egies for corn and soybeans in Georgia and of past studies, Kenyon noted a need for more Illinois are analyzed to determine the optimal evaluation of marketing strategies involving amount of futures contracting which may be simultaneous consideration of production, a hedge or a speculative position. A partial price, and financial risks. hedge is optimal for most situations for risk Some of the studies mentioned suggest that averse producers when the amount hedged hedging can significantly reduce exposure to is variable. With fixed quantity transactions, risk. Although surveys of farmers have found speculative and cash positions, but not hedglimited use of futures markets to manage ing, tend to be E-V efficient. price risk (Paul et al.), a new pricing environment may provide new opportunities