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Risk management strategies using seasonal climate forecasting in irrigated cotton production: a tale of stochastic dominance

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Author Info

  • Ritchie, John W.
  • Abawi, G. Yahya
  • Dutta, Sunil C.
  • Harris, Trevor R.
  • Bange, Michael
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    Abstract

    Decision‐making in agriculture is carried out in an uncertain environment with farmers often seeking information to reduce risk. As a result of the extreme variability of rainfall and stream‐flows in north‐eastern Australia, water supplies for irrigated agriculture are a limiting factor and a source of risk. The present study examined the use of seasonal climate forecasting (SCF) when calculating planting areas for irrigated cotton in the northern Murray Darling Basin. Results show that minimising risk by adjusting plant areas in response to SCF can lead to significant gains in gross margin returns. However, how farmers respond to SCF is dependent on several other factors including irrigators’ attitude towards risk.

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    Bibliographic Info

    Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

    Volume (Year): 48 (2004)
    Issue (Month): 1 (March)
    Pages:

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    Handle: RePEc:ags:aareaj:117862

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    Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200
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    Related research

    Keywords: Crop Production/Industries; Risk and Uncertainty;

    References

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    1. Buschena, David E. & Zilberman, David, 1994. "What Do We Know About Decision Making Under Risk And Where Do We Go From Here?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
    2. McCarl, Bruce A. & Bessler, David A., 1989. "Estimating An Upper Bound On The Pratt Risk A Version Coefficient When The Utility Function Is Unknown," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 33(01), April.
    3. McCarl, Bruce A., 1990. "Generalized Stochastic Dominance: An Empirical Examination," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 22(02), December.
    4. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
    5. McCarl, Bruce A., 1988. "Preference Among Risky Prospects Under Constant Risk Aversion," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 20(02), December.
    6. Graham R. Marshall & Kevin A. Parton & G.L. Hammer, 1996. "Risk Attitude, Planting Conditions And The Value Of Seasonal Forecasts To A Dryland Wheat Grower," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 40(3), pages 211-233, December.
    7. Maynard, Leigh J. & Harper, Jayson K. & Hoffman, Lynn D., 1997. "Impact Of Risk Preferences On Crop Rotation Choice," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 26(1), April.
    8. Byerlee, Derek R. & Anderson, Jock R., 1982. "Risk, Utility and the Value of Information in Farmer Decision Making," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 50(03), December.
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    Cited by:
    1. N. Marshall & I. Gordon & A. Ash, 2011. "The reluctance of resource-users to adopt seasonal climate forecasts to enhance resilience to climate variability on the rangelands," Climatic Change, Springer, vol. 107(3), pages 511-529, August.
    2. Nguyen, Nam C. & Wegener, Malcolm K. & Russell, Iean W. & Cameron, Donald & Coventry, David & Cooper, Ian M., 2007. "Risk management strategies by Australian farmers: two case studies," AFBM Journal, Australasian Farm Business Management Network, vol. 4(1/2).
    3. Lee, Lisa Yu-Ting & Ancev, Tihomir & Vervoort, Willem, 2006. "Weighing Up the Cost: Economic Impact of Water Scarcity and Environmental Targets," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139878, Australian Agricultural and Resource Economics Society.
    4. Ancev, Tihomir & Vervoort, Willem & Odeh, Inakwu O.A., 2004. "Economic Evaluation Of Watershed Management Options In The Irrigated Cotton Areas Of The Upper Murray-Darling Basin In New South Wales, Australia," 2004 Annual meeting, August 1-4, Denver, CO 20283, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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