A mixed-method approach for determining the risk and complexity farmers associate with using forward contracts

This paper reports on a model that was developed to understand the behavioural determinants surrounding farmers’ adoption of forward contracts for agricultural commodities. Based on the Theory of Planned Behaviour and Diffusion of Innovations, 28 hypotheses within the model were written and then tested via a telephone survey that gathered 305 responses from Western Australian wool producers. The data from the telephone survey were analysed using SPSS 14 and the Partial Least Squares approach to Structural Equation Modelling. Most relationships within the model could be explained after rigorous quantitative analysis, however, further explanation was required to understand two final aspects of adoption behaviour: firstly, the sources of risk wool producers perceive about using forward contracts and, secondly, why ‘complexity’, which is normally a limiting factor to adoption, was not significant in the context of using forward contracts to sell wool. Qualitative case studies of four Western Australian wool producers were conducted to fill these gaps. Key findings from the case studies were that profit-raising, the whole farm system as basis for decision making, the mass media and social pressures are important behavioural factors that are limiting the adoption of forward contracts by Australian wool producers.