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This paper aims to explain the preference of French farmers for futures markets over options when selling their production, and to understand the reasons behind the underuse of options compared to their marginal utility in a context of heightened price volatility and increasing hedging needs. To this end, this research thesis builds on existing literature, focusing primarily on the reasons behind farmers’ preference for futures markets over spot markets. From this body of work, several explanatory factors are identified and then tested against our specific research question: why do farmers prefer futures over options?
These factors are examined through a qualitative research approach using two separate questionnaires: one aimed directly at farmers, and the other at their financial intermediaries. The responses reveal the influence of economic and behavioral factors, as well as elements directly tied to farmers’ profiles, that help explain why options are largely overlooked as a tool for selling agricultural production.
Findings suggest that farmers’ profiles - characterized by a lack of training and awareness regarding options, as well as insufficient and ineffective guidance from financial intermediaries - partly explain their limited use of these instruments. Economically, options are costly, volatile, and require upfront cash outflows, which discourages farmers, who still prefer using insurance for hedging.
Moreover, farmers’ financial objectives are not always aligned with true hedging strategies. Rather, they often seek to wait and sell at the highest possible price, engaging in speculative behavior. This speculative tendency is largely influenced by low risk aversion and an overconfidence bias, coupled with a general distrust of financial products and options.
Finally, the combination of these three categories of factors explains the underuse of options and the prevailing preference for futures among farmers.
