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Using Portfolio Theory to Enhance Wheat Yield Stability in Low-Income Nations: An Application in the Yaqui Valley of Northwestern Mexico

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  • Nalley, Lawton Lanier
  • Barkley, Andrew P.

Abstract

This study applies portfolio theory to wheat varietal selection decisions in order to find risk-minimizing outcomes while holding historical yields constant. Potential correlation across wheat cultivar yields increases the complexity of cultivar selection decisions, with gains in one attribute (yield potential) often associated with losses in another (yield stability). Using location-specific empirical data, portfolio theory can provide producers in low-income countries a tool for developing a recommended portfolio of varieties given a desired risk-aversion level. Based on data from Mexico’s Yaqui Valley, results suggest that sowing a portfolio of wheat varieties could have lowered yield variance by 22% to 33% in Northwest Mexico.

Suggested Citation

  • Nalley, Lawton Lanier & Barkley, Andrew P., 2010. "Using Portfolio Theory to Enhance Wheat Yield Stability in Low-Income Nations: An Application in the Yaqui Valley of Northwestern Mexico," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(2), pages 1-14, August.
    • Handle: RePEc:ags:jlaare:93223
    DOI: 10.22004/ag.econ.93223
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    Cited by:

    1. Nalley, Lawton & Tsiboe, Francis & Durand-Morat, Alvaro & Thoma, Greg & Shew, Aaron, 2017. "The Economic Impact of Rice Sheath Blight Alleviation in the Mid‐South," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 251955, Southern Agricultural Economics Association.
    2. Jesse Tack & Andrew Barkley & Lawton Nalley, 2014. "Heterogeneous effects of warming and drought on selected wheat variety yields," Climatic Change, Springer, vol. 125(3), pages 489-500, August.
    3. Bodin, P. & Olin, S. & Pugh, T.A.M. & Arneth, A., 2016. "Accounting for interannual variability in agricultural intensification: The potential of crop selection in Sub-Saharan Africa," Agricultural Systems, Elsevier, vol. 148(C), pages 159-168.
    4. Paut, Raphaël & Sabatier, Rodolphe & Tchamitchian, Marc, 2019. "Reducing risk through crop diversification: An application of portfolio theory to diversified horticultural systems," Agricultural Systems, Elsevier, vol. 168(C), pages 123-130.
    5. Cong, Rong-Gang & Hedlund, Katarina & Andersson, Hans & Brady, Mark, 2014. "Managing soil natural capital: An effective strategy for mitigating future agricultural risks," MPRA Paper 112155, University Library of Munich, Germany.
    6. Tsiboe, Francis & Nalley, Lawton Lanier & Durand, Alvaro & Thoma, Greg & Shew, Aaron, 2017. "The Economic and Environmental Benefits of Sheath Blight Resistance in Rice," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 42(2), May.
    7. Mortenson, Ryan & Parsons, Jay & Pendell, Dustin L. & Haley, Scott D., 2012. "Wheat Variety Selection: An Application of Portfolio Theory in Colorado," Western Economics Forum, Western Agricultural Economics Association, vol. 11(2), pages 1-12.
    8. Hansen, James & Hellin, Jon & Rosenstock, Todd & Fisher, Eleanor & Cairns, Jill & Stirling, Clare & Lamanna, Christine & van Etten, Jacob & Rose, Alison & Campbell, Bruce, 2019. "Climate risk management and rural poverty reduction," Agricultural Systems, Elsevier, vol. 172(C), pages 28-46.

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    Keywords

    Crop Production/Industries;

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