Risk management of agribusiness in the State of São Paulo

Abstract

The aim of this study is to analyze the market risk of corn producers in the state of São Paulo. Attempt was made quantify the effect of the subsidy to the premium put options on futures contracts in revenue producers. Data from the Institute of Agricultural Economics in São Paulo, methodology of Monte Carlo simulation and statistical analysis of price data and productivity of regions of Assis, Itapeva and São João da Boa Vista is used, the period from 2003 to 2012. The results show that the use of option sales contracts for risk management can reduce the standard deviation of gross revenue per hectare by up to 24%. In regions where fluctuations in productivity are not the major risk factor than prices received this type of hedge would provide positive protection against the risks of the market. Thus, the adoption of risk management can assist in better control of supply to producers and reduce market risks in the state of São Paulo.