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A real options analysis of coffee planting in Vietnam

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  • Quoc V. Luong
  • Loren W. Tauer

Abstract

Vietnam grew from an insignificant to the world's second largest coffee producer during the 1990s. To understand this growth, this article examines Vietnamese coffee growers' investment decisions using real options theory. The study finds that producers, with variable costs of 19 cents/lb and total cost of 29.3 cents/lb, would enter coffee production at a coffee price of 47 cents/lb and exit at a coffee price of 14 cents/lb. Most Vietnamese growers appear to be sufficiently efficient to continue producing coffee even at relatively depressed price levels. Copyright 2006 International Association of Agricultural Economists.

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Bibliographic Info

Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

Volume (Year): 35 (2006)
Issue (Month): 1 (07)
Pages: 49-57

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Handle: RePEc:bla:agecon:v:35:y:2006:i:1:p:49-57

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References

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  1. Janis M. Carey & David Zilberman, 2002. "A Model of Investment under Uncertainty: Modern Irrigation Technology and Emerging Markets in Water," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 171-183.
  2. Bryant, Amy & Richards, Timothy J., 1998. "Hysteresis And The Shortage Of Agricultural Labor," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20858, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Timothy J. Richards & Paul M. Patterson, 1998. "Hysteresis and the Shortage of Agricultural Labor," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 683-695.
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Cited by:
  1. Thang, Tran Cong & Burton, Michael P. & Brennan, Donna C., 2009. "Optimal replanting and cutting rule for coffee farmers in Vietnam," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47638, Australian Agricultural and Resource Economics Society.
  2. Eskandar Elmarzougui & Bruno Larue, 2013. "On the Evolving Relationship Between Corn and Oil Prices," Agribusiness, John Wiley & Sons, Ltd., vol. 29(3), pages 344-360, 06.
  3. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Comparison of the Investment Behavior of German and Kazakhstani Farmers: an Experimental Approach," Discussion Papers 122422, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
  4. Seyoum, Emayenesh & Chan, Chris, 2012. "A real-options analysis of wine grape farming in north west Victoria," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124446, Australian Agricultural and Resource Economics Society.
  5. Ihli, Hanna Julia & Maart, Syster Christin & Musshoff, Oliver, 2012. "Investment and Disinvestment in Irrigation Technology – An Experimental Analysis of Farmers’ Decision Behavior –," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124532, Agricultural and Applied Economics Association.
  6. Ihli, Hanna Julia & Musshoff, Oliver, 2013. "Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis," Discussion Papers 154775, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
  7. Ihli, Hanna Julia & Musshoff, Oliver, 2013. "Understanding the Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150331, Agricultural and Applied Economics Association.
  8. Feil, Jan-Henning & Musshoff, Oliver, 2012. "Policy Impact Analysis on Investments and Disinvestments under Competition: A Real Options Approach," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124294, Australian Agricultural and Resource Economics Society.
  9. Tubetov, Dulat & Musshoff, Oliver & Kellner, Ulla, 0. "Investments in Kazakhstani Dairy Farming: A Comparison of Classical Investment Theory and the Real Options Approach," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 51.
  10. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Experimental examination of land investment decisions with volatile returns A comparison between Kazakhstani and German farmers," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122454, European Association of Agricultural Economists.
  11. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "The comparison of investment behaviors of Kazakhstani and German farmers: An experimental approach," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134770, Agricultural Economics Society.

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