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Risk And Returns Of Diversified Cropping Systems Under Nonnormal, Cross-, And Autocorrelated Commodity Price Structures

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  • Ramirez, Octavio A.
  • Somarriba, Eduardo

Abstract

This study analyzes the risks of diversified tropical cropping systems that combine cocoa, plantain, and tree-crop components in different proportions versus traditional monocultures. A technique for modeling the expected values, variances, and covariances of correlated time-series variables that are autocorrelated and nonnormal (right or left skewed and kurtotic) is applied to simulate commodity prices. The importance of using simulated cumulative density functions (cdf's) which reflect the most important characteristics of the stochastic behavior of prices for analyzing risk and returns of diversified agricultural systems is demonstrated. The analysis priovides evidence in favor of diversified cocoa-plantain-Cordia agroforestry system technologies versus the traditional monocultures.

Suggested Citation

  • Ramirez, Octavio A. & Somarriba, Eduardo, 2000. "Risk And Returns Of Diversified Cropping Systems Under Nonnormal, Cross-, And Autocorrelated Commodity Price Structures," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-16, December.
    • Handle: RePEc:ags:jlaare:30901
    DOI: 10.22004/ag.econ.30901
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    References listed on IDEAS

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    1. C. Robert Taylor, 1990. "Two Practical Procedures for Estimating Multivariate Nonnormal Probability Density Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(1), pages 210-217.
    2. Octavio A. Ramírez, 1997. "Estimation and Use of a Multivariate Parametric Model for Simulating Heteroskedastic, Correlated, Nonnormal Random Variables: The Case of Corn Belt Corn, Soybean, and Wheat Yields," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 191-205.
    3. Charles B. Moss & J. S. Shonkwiler, 1993. "Estimating Yield Distributions with a Stochastic Trend and Nonnormal Errors," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 1056-1062.
    4. Anderson, Jock R., 1974. "Simulation: Methodology and Application in Agricultural Economics," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 42(01), pages 1-53, March.
    5. McDonald, James B., 1989. "Partially adaptive estimation of ARMA time series models," International Journal of Forecasting, Elsevier, vol. 5(2), pages 217-230.
    6. Ramirez, Octavio A. & Somarriba, Eduardo, 1999. "Joint Modeling And Simulation Of Autocorrelated Non-Normal Time Series: An Application To Risk And Return Analysis," 1999 Annual meeting, August 8-11, Nashville, TN 21564, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Ramirez, Octavio A. & Sosa, Romeo, 2000. "Assessing The Financial Risks Of Diversified Coffee Production Systems: An Alternative Nonnormal Cdf Estimation Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(1), pages 1-19, July.
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    Cited by:

    1. Bharat M. Upadhyay & Douglas L. Young, 2004. "An Operational Approach For Evaluating Investment Risk: An Application To The No-Till Transition," Others 0412002, University Library of Munich, Germany.
    2. Gregory Colson & Octavio A. Ramirez & Shengfei Fu, 2014. "Crop Insurance Savings Accounts: A Viable Alternative to Crop Insurance?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 36(3), pages 527-545.
    3. Ramirez, Octavio A. & Mohanty, Samarendu & Carpio, Carlos E. & Denning, Megan, 2004. "Issues and Strategies for Aggregate Supply Response Estimation for Policy Analyses," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(2), pages 1-17, August.
    4. Ramirez, Octavio A., 2014. "Appendix I to: Crop Insurance Savings Accounts: A Viable Alternative to Crop Insurance?," Applied Economic Perspectives and Policy Appendices 162318, Agricultural and Applied Economics Association.
    5. Bharat M. Upadhyay & Douglas L. Young, 2005. "An Operational Approach for Evaluating Investment Risk: An Application to the No-Till Transition," Working Papers 2005-1, School of Economic Sciences, Washington State University.
    6. Fleming, Euan & Milne, Mary, 2003. "Bioeconomic modelling of the production and export of cocoa for price policy analysis in Papua New Guinea," Agricultural Systems, Elsevier, vol. 76(2), pages 483-505, May.
    7. Upadhyay, Bharat Mani & Young, Douglas L., 2005. "An Operational Approach for Evaluating Investment Risk: An Application to the No-Till Transition," Working Papers 12958, Washington State University, School of Economic Sciences.

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    Demand and Price Analysis;

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