Impact of Market Price Volatility on Expected Operating Income and Income Risk for Swine Farmers in China: An Analysis of the Effectiveness of Spatiotemporal Sales Strategy Selection

Price volatility of agricultural products is a major obstacle to the market operation decisions and benefit realization of small farmers in developing countries. Few studies have simultaneously addressed the impact of price volatility on both expected income and income risk. We establish a micro‐founded framework to examine the effects of hog price volatility and the efficacy of farmers' spatiotemporal sales strategy selection as a buffer. China, being the world's largest producer and consumer of hogs, faces a significant challenge where farmers are heavily impacted by price volatility. Employing the Method of Moments to estimate expected income and income risk, we analyze data from a survey of Chinese hog farmers. Our empirical findings support the hypothesis that price volatility exerts severe adverse impacts, not only reducing farmers' expected income but also increasing income risk, with price shocks disproportionately borne by relatively smaller‐scale farmers. Farmers' spatial sales strategy, namely selling in other regions, can alleviate the adverse effects of price volatility; however, the temporal sales strategy, which involves signing price contracts, only reduces income risk without enhancing expected income. Our research reveals the limitations of price contracts for smallholder farmers, indicating that they primarily reduce income risk without a significant improvement in bargaining power.