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Profitability of Irrigated Corn Production in Alabama: A Stochastic Analysis

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  • Nadolnyak, Denis

Abstract

Rising com prices and growing ethanol markets may intensify production practices. Relative abundance of water resources and predominance of rainfed com production in Alabama may trigger expansion of in-igation in the region. This paper reports results of analysis of producer decisions on switching to irrigated com production in North Alabama under different market conditions and producer characteristics. Simulated yield, production, and cost data are used in generating stochastic profit series. Simulation results show that the certainty equivalent profit premium from inigated production increases with output prices and risk aversion. For realistic parameter value ranges, com prices between $3 and $4 (roughly $4.40 and $5.90 in 2022) per bushel make investment in irrigation profitable.

Suggested Citation

  • Nadolnyak, Denis, 2021. "Profitability of Irrigated Corn Production in Alabama: A Stochastic Analysis," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 39(2).
    • Handle: RePEc:ags:jloagb:401379
    DOI: 10.22004/ag.econ.401379
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    References listed on IDEAS

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    1. Alan P. Ker & Keith Coble, 2003. "Modeling Conditional Yield Densities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 291-304.
    2. Barry K. Goodwin & Alan P. Ker, 1998. "Nonparametric Estimation of Crop Yield Distributions: Implications for Rating Group-Risk Crop Insurance Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 139-153.
    3. Mario J. Miranda & Joseph W. Glauber, 1997. "Systemic Risk, Reinsurance, and the Failure of Crop Insurance Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 206-215.
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