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Effects of Federal Risk Management Programs on Optimal Acreage Allocation and Nitrogen Use in a Texas Cotton-Sorghum System

  • Seo, Sangtaek
  • Mitchell, Paul D.
  • Leatham, David J.

We analyze the effects of crop insurance and the Marketing Loan Program on optimal nitrogen use and acreage allocation for a case cotton-sorghum farm in Texas. A mathematical programming model is used to solve for the optimal nitrogen fertilizer rate, crop acreage allocation, coverage level, and price election factor, along with participation in the crop insurance and the Marketing Loan Program for both crops. Results show that depending on the crop and farmer risk aversion, these federal risk management programs increase or decrease optimal fertilizer rates-6% to 3%, increase optimal cotton acreage 94% to 144%, and decrease sorghum acres up to 50%.

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File URL: http://purl.umn.edu/43503
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Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 37 (2005)
Issue (Month): 03 (December)
Pages:

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Handle: RePEc:ags:joaaec:43503
Contact details of provider: Web page: http://www.saea.org/jaae/jaae.htm

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  1. Hennessy, David A., 1998. "The Production Effects of Agricultural Income Support Policies Under Uncertainty," Staff General Research Papers 1207, Iowa State University, Department of Economics.
  2. Bruce A. Babcock & Joseph A. Herriges, 1994. "Input Demand Under Yield and Revenue Insurance," Center for Agricultural and Rural Development (CARD) Publications 94-wp127, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  3. Coble, Keith H. & Heifner, Richard G. & Zuniga, Manuel, 2000. "Implications Of Crop Yield And Revenue Insurance For Producer Hedging," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
  4. Babcock, Bruce A. & Choi, E. Kwan & Feinerman, Eli, 1993. "Risk And Probability Premiums For Cara Utility Functions," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(01), July.
  5. Vincent H. Smith & Barry K. Goodwin, 1996. "Crop Insurance, Moral Hazard, and Agricultural Chemical Use," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 428-438.
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