Exchange rate exposure of agricultural cooperatives

• Published in: Agribusiness (New York, N.Y.) Vol. 36; no. 1; pp. 94 - 110
• Main Author: Piccoli, Pedro
• Format: Journal Article
• Language: English
• Published: Hoboken Wiley Periodicals Inc 2020
• Subjects: Agricultural cooperatives; Agricultural economics; Agricultural management; Agronomy; Asset management; Economic models; Exposure; Foreign exchange rate risk; Foreign exchange rates; Product differentiation
• ISSN: 0742-4477; 1520-6297
• DOI: 10.1002/agr.21629

Despite the growth of exchange risk literature in the field of agricultural economics, little attention has been paid to firm‐level currency exposure in emerging countries. In this context, this paper investigates the exchange rate exposure faced by a unique data set of 66 Brazilian agricultural cooperatives from 2000 to 2015, and finds that around one‐third of the sampled firms exhibited significant exposure during this period, even after controlling for crises. The paper also documents that the proportion of exposed firms doubles during periods in which the local central bank intervenes more in the currency regime, lending support to the moral hazard hypothesis: when the exchange rate is less flexible, local companies tend to adopt unhedged positions in response to implicit government guarantees. Finally, firms with more debt, better asset management, lower inventory levels, and higher product differentiation tend to be less exposed to currency swings [EconLit Citations: F31, G15, G23].