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Spatial and Temporal On-Farm Risk Management - Crop Production Scheduling and Index Insurance Strategies

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Author Info
Lin, Shanshan
Mullen, Jeffrey D.
Hoogenboom, Gerrit
Abstract

An agronomic crop growth model, Decision Support System for Agro-Technology Transfer (DSSAT), is used to find optimal crop management strategies for cotton production in Mitchell, Miller, and Lee Counties in Georgia during the past 10 years. Planting date and irrigation threshold are the two variables optimized to maximize farmer's expected utility. A decreasing absolute risk aversion - constant relative risk aversion (DARA-CRRA) utility function is used to examine crop management decision that can be influenced by changes in inter-temporal risk behavior. Comparison is made from management perspective - one is dynamic crop management strategy that varies each year; one is static (constant) strategy over 10 years. Based on the best crop management strategies, index insurance products are designed to help farmers further reduce production risk. The impact of geographical basis risk was assessed by comparing the risk reduction generated from index insurance contracts based on different weather stations; the impact of temporal basis risk is assessed by allowing separate contracts to be purchased for different sub-periods during the entire period.

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File URL: http://purl.umn.edu/49350
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Publisher Info
Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49350.

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Date of creation: 2009
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Handle: RePEc:ags:aaea09:49350

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Related research
Keywords: Irrigation; Planting Date; Risk Management; Weather Derivative Contract; Basis Risk; Agribusiness; Agricultural Finance; Crop Production/Industries; Farm Management; Financial Economics; Risk and Uncertainty;

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  1. Skees, Jerry & Gober, Stephanie & Varangis, Panos & Lester, Rodney & Kalavakonda, Vijay, 2001. "Developing rainfall-based index insurance in Morocco," Policy Research Working Paper Series 2577, The World Bank. [Downloadable!]
  2. Miranda, Mario & Vedenov, Dmitry V, 2001. " Innovations in Agricultural and Natural Disaster Insurance," American Journal of Agricultural Economics, American Agricultural Economics Association, vol. 83(3), pages 650-55, August. [Downloadable!] (restricted)
  3. Martin, Steven W. & Barnett, Barry J. & Coble, Keith H., 2001. "Developing And Pricing Precipitation Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July. [Downloadable!]
  4. Escalante, Cesar L. & Rejesus, Roderick M., 2005. "Farmland Control Decisions under Different Intertemporal Risk Behavioral Constructs," 2005 Annual meeting, July 24-27, Providence, RI 19113, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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This page was last updated on 2009-12-26.


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