Agriculture and Food Systems - Theses

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Type: Masters Research thesis × Author: Ada, Timothy James × Subject: Cotton growing × Start date: 2004 × End date: 2004 ×

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    Price risk management in the Australian cotton industry
    Ada, Timothy James ( 2004)
    Over 95 per cent of Australian cotton producers have attempted to manage price risk at some time, through a broad range of management strategies. The findings of this study suggest that the cotton industry has to date, embraced the principals of price risk management more so than other agricultural commodity industries in Australia. Nearly 60 per cent of Australian cotton producers stated that price risk management had a positive effect on their farm business. Findings from the study suggest that price risk management is only one of a suite of business management tools, but when implemented strategically, it can lead to positive outcomes in terms of business planning and ultimately through increased profitability. A lack of understanding of price risk management and, more specifically, recent currency exchange losses and high production risks were the key contributing factors for the 21 per cent of producers who stated that price risk management had a negative impact on their business. Approximately 10 per cent of cotton producers operated dryland production systems. These producers often incurred a broader range of production risks, and the resulting production uncertainty inhibited effective use of some price risk management strategies. One in four cotton producers had an agriculture-related tertiary qualification, yet few (around five per cent) had undertaken any form of specialist price risk management training. While some cotton producers are competent managers of price risk, the primary conclusion from the study is that much of the current uptake and effectiveness of price risk management in the Australian cotton industry generally, is somewhat limited by a lack of producer experience, confidence and understanding of price risk management principles and processes.