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Risk in Investment Decision Making and Greenhouse Tomato Production Expansion in Florida

Author

Listed:
  • Asci, Serhat
  • VanSickle, John J.
  • Cantliffe, Daniel J.

Abstract

The outcomes of agricultural investment decisions are affected by the risk in price, cost, and yield outcomes. To examine those risks, net present value models with Monte Carlo simulation are used to analyze the viability of greenhouse tomato investment decisions. The analysis is further extended by utilizing a real options approach. The results indicate that a grower would choose to continue field-grown tomato production due to high option values and risk aversion. Moreover, some policies or market conditions which increase credit availability, decrease energy prices, reduce tomato price fluctuation and/or facilitate effective risk management strategies would make the greenhouse production preferable.

Suggested Citation

  • Asci, Serhat & VanSickle, John J. & Cantliffe, Daniel J., 2014. "Risk in Investment Decision Making and Greenhouse Tomato Production Expansion in Florida," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 17(4), pages 1-26, November.
  • Handle: RePEc:ags:ifaamr:188706
    as

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    File URL: http://ageconsearch.umn.edu/record/188706/files/201400271.pdf
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    References listed on IDEAS

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    Cited by:

    1. Asci, Serhat & Seale, James L. & Onel, Gulcan & VanSickle, John J., 2016. "U.S. and Mexican Tomatoes: Perceptions and Implications of the Renegotiated Suspension Agreement," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(1), pages 1-23, January.

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