Mitigating Cotton Revenue Risk Through Irrigation, Insurance, and Hedging

Barham, Elizabeth; Robinson, John R.; Richardson, James W.; Rister, M. Edward

doi:10.1017/s1074070800000055

Cited by 26 publications

(26 citation statements)

References 17 publications

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“…In other words, SDRF establishes necessary and sufficient conditions for the cumulative distribution function of F (y) to be preferred to the cumulative distribution function of G (y) by all individuals whose absolute risk aversion functions lie between lower r 1 (y) and upper bounds r 2 (y) (Harris and Mapp, 1986). Stochastic dominance with respect to a function has been implemented by many empirical studies (Barham et al, 2011;Cochran et al, 1985;Greene et al, 1985;Harris and Mapp, 1986;King and Robison, 1981;de la Llata et al, 1999;Musser et al, 1981;Parcell and Langemeier, 1997;Ritchie et al, 2004;Zacharias and Grube, 1984). It is a practical tool to help farmers better understand their risk preferences and choices under price, yield, or weather uncertainty (King and Robison, 1981).…”

Section: Stochastic Dominancementioning

confidence: 99%

Risk Management Strategies using Precision Agriculture Technology to Manage Potato Late Blight

et al. 2017

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Precision agriculture has emerged as a revolutionary technology, which transforms farming related data into useful information for agricultural decision-making. Th is paper compares precision farming technology with calendar-based approach in scheduling fungicide applications to manage potato (Solanum tuberosum L.) late blight disease. Th ree fungicide scheduling strategies were evaluated: calendar-based strategy, BlightPro decision support system based strategy (DSS-based strategy), and unsprayed control. Using results from 14 yr of computer simulation experiments for 59 locations in the United States, we constructed distributions of net return to all costs excluding fungicide cost and application cost per 0.41 ha (net return per 0.41 ha) for the calendar-based and DSS-based strategies at each location. Th ese distributions were then compared using three risk management methods: stochastic dominance, stochastic dominance with respect to a function, and stochastic effi ciency with respect to a function. Th e DSS-based strategy was identifi ed as the most eff ective approach to manage late blight in terms of disease suppression, net return per 0.41 ha, and risk-adjusted net return. Results indicate that the DSS-based strategy is the preferred method to schedule fungicide applications. Under high disease pressure circumstances, the economic benefi ts to potato growers of adopting the precision agriculture technology ranged from US$30 to $573 per 0.41 ha. For risk neutral individuals, who are concerned about the diff erence between average net return per 0.41 ha, the benefi ts ranged from $30 to $305 per 0.41 ha. Except for growers raising the moderately resistant potato cultivars, more risk averse individuals tended to benefi t more from adopting the precision agriculture technology, with benefi ts ranging from $38 to $573 per 0.41 ha. Abbreviations: AUDPC, area under disease progress curve; CE, certainty equivalent; DSS, decision support system; FSD, fi rst-degree stochastic dominance; RP, risk premium; net return per 0.41 ha, net return to all costs excluding fungicide cost and application cost per 0.41 ha; SERF, stochastic effi ciency with respect to a function; SSD, second-degree stochastic dominance; SDRF, stochastic dominance with respect to a function. Core ideas• Th e benefi ts of adopting precision farming technology was investivated in scheduling fungicide applications to manage potato late blight.• Th e precision farming technology is the preferred method to schedule fungicide applications in terms of disease suppression, net return per 0.41 ha, and risk-adjusted net return.• Th e increased adoption of the precision farming technology would help manage late blight, limit potential crop losses, and improve net returns.

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Section: Stochastic Dominancementioning

confidence: 99%

Risk Management Strategies using Precision Agriculture Technology to Manage Potato Late Blight

et al. 2017

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“…These assumptions mean that for f(x) to dominate g(x), the area under the CDF of f(x) must be smaller than the area under the CDF of g (x). This assumption allows the two-cumulative distribution to cross if the difference in the area before they cross at low distribution is relatively smaller compared to the difference in the area after they cross at upper distribution of the CDF (Barham et al, 2011). This implies that adoption does not necessarily reduce the probability of very low-net returns or yield outcomes but improved varieties dominate traditional varieties and therefore reduce production risk especially for small-scale farmers who are risk averse.…”

Section: Economic Profitability and Risk Analysesmentioning

confidence: 99%

“…Barham et al (2011), Hignight et al (2010 and Hardaker et al (2004) suggest using stochastic efficiency with respect to a function (SERF) to complement stochastic dominance analysis while taking advantages offered by SDRF. Using risk aversion bounds, SERF works by identifying utility efficient alternatives for ranges of risk attitudes and not by finding (a subset of) dominated alternatives.…”

Section: Economic Profitability and Risk Analysesmentioning

confidence: 99%

Economic profitability and risk analyses of improved sorghum varieties in Tanzania

Kaliba¹,

Mazvimavi²,

Ghebreyesus³

2017

J. Dev. Agric. Econ.

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This study uses survey data collected in 2012/2013 farming season to determine the net-returns and utility-efficient farm management practices for improved sorghum varieties adopted by small-scale farmers in Tanzania. The reference farm management practice was using JEMBE (handhole) for land cultivation and growing local varieties (landraces). Other farm management practices included using ox-plough for land cultivation with or without applying manure for soil amendment, and using JEMBE for land cultivation with or without applying manure. Improved sorghum Varieties included Tegemeo, Pato, Macia, Wahi, Hakika, Mtama-1, and Sila. We used simulation and bootstrapping to estimate yield distributions and net returns and stochastic efficiency with respect to a function to complement first and second degree stochastic dominance analyses to determine varieties and farm management practice that reduce production and price risk. Under profit maximization and risk reduction assumptions, main results show that Macia and Mtama-1 varieties have high mean yield and low yield variability. Even under low inputs and extreme risk averse farmers, Macia and Mtama-1 were superior choices. Value addition activities increased price offered to farmers, which also reduced price risk.

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“…More recent agricultural studies using stochastic simulation in the analysis of net returns look at economic performance of different crop production systems (McLellan 2009;Barham et al 2011;Williams et al 2012) and livestock calving and finishing systems (Anderson et al 2004;Khakbazan et al 2014Khakbazan et al , 2015. The benefit of stochastic simulation models, in analyses comparing alternative systems, is that they allow uncertainty to be incorporated into the model through consideration of both various scenarios, as well as how scenario assumptions affect the expected values and variances of outcomes for key model variables.…”

Section: Introductionmentioning

confidence: 99%

An economic analysis of resting versus nonresting perennial pastures during the critical acclimation period

et al. 2016

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Economic evaluations were carried out on stochastically simulated production systems using data from a grazing systems' trial, which evaluated the impact of resting (i.e., grazing cessation) alfalfa (Medicago sativa L.) -bromegrass (Bromus riparius Rehm. 'Fleet') and grass-only (G) pastures during the critical prefrost period on beef cattle (Bos taurus) productivity. Grazing systems were compared on the basis of calculated net present value of returns analysis. Lower production costs through reduced fertilization requirements resulted in alfalfa-grass (AG) preference over G pastures, while returns from increased calf sale weights resulted in nonrested systems being preferred over rested systems. However, low presence of alfalfa in the AG pastures likely limited the potential for resting pastures to improve production through increased alfalfa persistence. This evaluation found nonrested grazing of AG pastures to be preferred over other treatments on the basis of increased returns and reduced risk.Key words: alfalfa, bromegrass, cow-calf production, net present value of return, rested vs. nonrested grazing, risk.Résumé : Des évaluations économiques ont été effectuées sur des systèmes de production simulés de façon stochastique en utilisant les données d'une étude sur les systèmes de pâturage, qui avait pour but d'évaluer l'impact du repos (cessation de broutage) dans les pâturages de luzerne (Medicago sativa L.) -brome (Bromus riparius Rehm. 'Fleet') et de foin seulement pendant la période importante avant le gel sur la productivité des bovins de boucherie (Bos taurus). Les systèmes de pâturages ont été comparés sur la base d'analyse de la valeur calculée actuelle nette des retours. Des coûts réduits de production par réduction des besoins en produits fertilisants se soldaient par une préférence pour les pâturages luzerne-foin par rapport aux pâturages de foin seulement, tandis que les retours imputables aux poids accrus à la vente des veaux se soldaient par une préférence des systèmes non mis au repos par rapport aux systèmes ayant été mis au repos. Par contre, une présence faible de la luzerne dans les pâturages de luzerne-foin a possiblement limité le potentiel des pâturages au repos d'augmenter la production par augmentation de la persistance de la luzerne. Cette évaluation a trouvé que le pâturage non mis au repos de luzerne-foin était préféré par rapport aux autres traitements selon l'augmentation des retours et la réduction des risques. [Traduit par la Rédaction] Mots-clés : luzerne, brome, production vache-veau, valeur calculée actuelle nette des retours, pâturage au repos contre non mis au repos, risque.

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Mitigating Cotton Revenue Risk Through Irrigation, Insurance, and Hedging

Cited by 26 publications

References 17 publications

Risk Management Strategies using Precision Agriculture Technology to Manage Potato Late Blight

Risk Management Strategies using Precision Agriculture Technology to Manage Potato Late Blight

Economic profitability and risk analyses of improved sorghum varieties in Tanzania

An economic analysis of resting versus nonresting perennial pastures during the critical acclimation period

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