Agricultural price risk management in commodities market

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School of Business | Master's thesis
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SME Business Management
Yrittäjyys ja pienyritysten johtaminen
Degree programme
The purpose of this thesis is to evaluate price risk management strategies of farmers in terms of the food commodities market and the usage of different selling methods in the local Finnish farming community. Price risk management methods have been previously studied mostly concentrating on only few methods per study. However, this thesis will evaluate the usage of multiple methods in order to evaluate price risk management issues on a more comprehensive and broad scale. Furthermore, the thesis is studying Finnish farmers´ understanding of the global commodities market fluctuations and also how global volatility affects local commodities price and demand levels. The findings of the study were collected using a quantitative survey with a pool of respondents consisting of Finnish farmers. The data received from the survey responses was studied using statistical analysis program. From the data, the author studied the differentiating factors among respondents and interpreted the community understanding and mindset. The usage of different price risk management tools was also studied. The findings of this thesis show that Finnish farmers use mainly traditional and simple methods in lowering their price risk level in terms of the commodities market. Generally, farmers are having more risk adverse attitude in selling their grain, as they are mostly looking for a sufficient price level covering expenses and margin. The results demonstrated also how individuals were facing great difficulties in understanding the global commodities market and in how to operate correctly in the volatile market situation. The conclusion of the study is that in the agricultural industry, the most suitable price risk management strategy depends on individual farmers´ motivation to study the market activities on a regular bases and their level of understanding the commodities future stock markets.
commodity market, raaka-ainemarkkinat, price risk management, hintariskin hallinta, agriculture, maatalous, futures stock market, futuurimarkkinat, grain, vilja
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