A Multi-Disciplinary Approach for Determining Adoption of Agricultural Price Risk Management Strategies

Abstract

Summary: Australian wool producers have been slow to adopt price risk management strategies to stabilise the income from their wool sales. The highly volatile auction system accounts for 85% of raw wool sales while the remainder is sold by forward contract, futures and other hedging methods. An attempt is made herein to understand the behavioural factors associated with the slow adoption of modern commodity trading tools in rural Australian wool-producing farm businesses. Consideration was initially given to prominent theoretical frameworks from the rural sociology research domain: Diffusion of Innovations, the Theory of Reasoned Action and the Theory of Planned Behaviour. While these are popular, time-tested theories of agribusiness and beyond, we needed to know if their constructs adequately capture all the dimensions of farm-level decision making. Qualitative analysis was used to reveal behavioural factors associated with the adoption of price risk management strategies (specifically futures and forward contracts) for selling raw wool. Data from four focus groups conducted with wool producers in regional