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Risk Attitude, Planting Conditions And The Value Of Seasonal Forecasts To A Dryland Wheat Grower

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  • Graham R. Marshall
  • Kevin A. Parton
  • G.L. Hammer

Abstract

The value of a seasonal forecasting system based on phases of the Southern Oscillation was estimated for a representative dryland wheat grower in the vicinity of Goondiwindi. In particular the effects on this estimate of risk attitude and planting conditions were examined. A recursive stochastic programming approach was used to identify the grower's utility-maximising action set in the event of each of the climate patterns over the period 1894-1991 recurring in the imminent season. The approach was repeated with and without use of the forecasts. The choices examined were, at planting, nitrogen application rate and cultivar and, later in the season, choices of proceeding with or abandoning each wheat activity. The value of the forecasting system was estimated as the maximum amount the grower could afford to pay for its use without expected utility being lowered relative to its non-use.

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File URL: http://hdl.handle.net/10.1111/j.1467-8489.1996.tb00595.x
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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): 40 (1996)
Issue (Month): 3 (December)
Pages: 211-233

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Handle: RePEc:bla:ajarec:v:40:y:1996:i:3:p:211-233

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References

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  1. Mjelde, James W. & Cochran, Mark J., 1988. "Obtaining Lower And Upper Bounds On The Value Of Seasonal Climate Forecasts As A Function Of Risk Preferences," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(02), December.
  2. Mazzocco, Michael A. & Mjelde, James W. & Sonka, Steven T. & Lamb, Peter J. & Hollinger, Steven E., 1992. "Using hierarchical systems aggregation to model the value of information in agricultural systems: An application for climate forecast information," Agricultural Systems, Elsevier, vol. 40(4), pages 393-412.
  3. J. Brian Hardaker & Louise H. Patten & David J. Pannell, 1988. "Utility‐Efficient Programming For Whole‐Farm Planning," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 32(2-3), pages 88-97, 08-12.
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  11. 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.
  12. Trebeck, David B. & Hardaker, J. Brian, 1972. "The Integrated Use Of Simulation And Stochastic Programming For Whole Farm Planning Under Risk," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 16(02), August.
  13. Easter, Christopher D. & Paris, Quirino, 1983. "Supply Response With Stochastic Technology And Prices In Australia'S Rural Export Industries," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 27(01), April.
  14. Kingwell, R. S. & Morrison, D. A. & Bathgate, A. D., 1992. "The effect of climatic risk on dryland farm management," Agricultural Systems, Elsevier, vol. 39(2), pages 153-175.
  15. Pannell, David J., 1994. "The Value Of Information In Herbicide Decision Making For Weed Control In Australian Wheat Crops," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(02), December.
  16. James W. Mjelde & Troy N. Thompson & Clair J. Nixon, 1996. "Government Institutional Effects on the Value of Seasonal Climate Forecasts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(1), pages 175-188.
  17. Kingwell, R. S. & Schilizzi, S. G. M., 1994. "Dryland pasture improvement given climatic risk," Agricultural Systems, Elsevier, vol. 45(2), pages 175-190.
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Citations

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Cited by:
  1. Petersen, E. H. & Fraser, R. W., 2001. "An assessment of the value of seasonal forecasting technology for Western Australian farmers," Agricultural Systems, Elsevier, vol. 70(1), pages 259-274, October.
  2. Ritchie, John W. & Abawi, G. Yahya & Dutta, Sunil C. & Harris, Trevor R. & Bange, Michael, 2004. "Risk management strategies using seasonal climate forecasting in irrigated cotton production: a tale of stochastic dominance," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(1), March.
  3. Hammer, G. L. & Hansen, J. W. & Phillips, J. G. & Mjelde, J. W. & Hill, H. & Love, A. & Potgieter, A., 2001. "Advances in application of climate prediction in agriculture," Agricultural Systems, Elsevier, vol. 70(2-3), pages 515-553.
  4. Kingwell, Ross & John, Michele, 2007. "The influence of farm landscape shape on the impact and management of dryland salinity," Agricultural Water Management, Elsevier, vol. 89(1-2), pages 29-38, April.
  5. Abedullah & Sushil Pandey, 2007. "The Value of Rainfall Forecasts in the Rainfed Rice Areas of the Philippines," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 12(2), pages 69-81, Jul-Dec.
  6. Williams, John & Malcolm, Bill, 2012. "Farmer decisions about selling wheat and managing wheat price risk in Australia," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 20.
  7. Nelson, R. A. & Holzworth, D. P. & Hammer, G. L. & Hayman, P. T., 2002. "Infusing the use of seasonal climate forecasting into crop management practice in North East Australia using discussion support software," Agricultural Systems, Elsevier, vol. 74(3), pages 393-414, December.

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