Economically Optimal Maize Cultivar Selection Under Conditions Of Risk

A representative farm in the Western Transvaal was synthesised. The degree to which risk should be avoided was determined by simulation of general characteristics of the farm and controlled parameters, including four combinations of maize cultivar strategies, two management levels, three combinations of inflation and interest rates and two asset/liability ratios. Cultivar strategies vary from one with a relatively high expected gross margin and associated high variation in gross margin to one with a relatively low expected gross margin and small variation therein. Cultivar strategies have a highly significant effect on accumulated net worth. The effect of cultivar strategy is not influenced by the various inflation conditions or asset/liability ratios. Optimal cultivar strategy limits losses in poor years, but simultaneously produces a big enough expected gross margin to compete with other strategies. Farmers with liquidity problems should adopt a conservative strategy. Only in years without liquidity problems should a cultivar strategy with a higher expected yield and at the same time a higher probability of a loss be followed.