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The adoption of innovative cropping systems under price and production risks: a dynamic model of crop rotation choice

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  • Ridier, Aude
  • Chaib, Karim
  • Roussy, Caroline

Abstract

In the paper we investigate the role played by both production and market risks on farmer’s decision to adopt long rotations (over 2 years), considered as innovative cropping systems. We build a multiperiod dynamic farm model (run under GAMS) that arbitrates each year between traditional and innovative rotations. With discrete stochastic programming, the production risk is accounted as an intra-year risk; yearly farming operations are declined according to a decision tree where probabilities are assigned. Subjective yield and cost distributions linked to this decision tree are elicited among a sample of 13 farmers that are experiencing this innovation in South-western France. The price risk is randomly distributed with a given market trend. The crop acreage can be revised according to the market situation. The simulations show that substantive sunk costs are incentive to remain in the long rotation when the farmer is already engaged and when he is supported for this engagement. They also show that both a high risk aversion and a highly positive market trend tend to slow down the conversion towards innovative systems.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122440.

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Date of creation: 23 Feb 2012
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Handle: RePEc:ags:eaa123:122440

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Keywords: innovative cropping systems; dynamic model; crop rotation decision; risk; subjective probabilities; Risk and Uncertainty; C61; D0; Q12; Q55;

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  1. Isik, Murat & Khanna, Madhu & Winter-Nelson, Alex, 2001. "Sequential Investment In Site-Specific Crop Management Under Output Price Uncertainty," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July.
  2. Tomomi Tanaka & Colin F. Camerer & Quang Nguyen, 2010. "Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam," American Economic Review, American Economic Association, vol. 100(1), pages 557-71, March.
  3. Abadi Ghadim, Amir K. & Pannell, David J., 1999. "A conceptual framework of adoption of an agricultural innovation," Agricultural Economics, Blackwell, vol. 21(2), pages 145-154, October.
  4. David A. Hennessy, 2004. "On Monoculture and the Structure of Crop Rotations," Center for Agricultural and Rural Development (CARD) Publications 04-wp369, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Blazy, Jean-Marc & Tixier, Philippe & Thomas, Alban & Ozier-Lafontaine, Harry & Salmon, Frédéric & Wery, Jacques, 2010. "BANAD: A farm model for ex ante assessment of agro-ecological innovations and its application to banana farms in Guadeloupe," Agricultural Systems, Elsevier, vol. 103(4), pages 221-232, May.
  6. Acs, Szvetlana & Berentsen, Paul & Huirne, Ruud & van Asseldonk, Marcel, 2009. "Effect of yield and price risk on conversion from conventional to organic farming," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(3), September.
  7. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  8. Graeme J. Doole & David J. Pannell, 2008. "Optimisation of a Large, Constrained Simulation Model using Compressed Annealing," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 188-206, 02.
  9. Marra, Michele & Pannell, David J. & Abadi Ghadim, Amir, 2003. "The economics of risk, uncertainty and learning in the adoption of new agricultural technologies: where are we on the learning curve?," Agricultural Systems, Elsevier, vol. 75(2-3), pages 215-234.
  10. Carpentier, Alain & Gohin, Alexandre & Letort, Elodie, 2011. "Accounting for agronomic rotations in crop production: A theoretical investigation and an empirical modeling framework," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103431, Agricultural and Applied Economics Association.
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