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Risk management strategies using seasonal climate forecasting in irrigated cotton production: a tale of stochastic dominance

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  • John W. Ritchie
  • G. Yahya Abawi
  • Sunil C. Dutta
  • Trevor R. Harris
  • Michael Bange

Abstract

Decision‐making in agriculture is carried out in an uncertain environment with farmers often seeking information to reduce risk. As a result of the extreme variability of rainfall and stream‐flows in north‐eastern Australia, water supplies for irrigated agriculture are a limiting factor and a source of risk. The present study examined the use of seasonal climate forecasting (SCF) when calculating planting areas for irrigated cotton in the northern Murray Darling Basin. Results show that minimising risk by adjusting plant areas in response to SCF can lead to significant gains in gross margin returns. However, how farmers respond to SCF is dependent on several other factors including irrigators’ attitude towards risk.

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  • John W. Ritchie & G. Yahya Abawi & Sunil C. Dutta & Trevor R. Harris & Michael Bange, 2004. "Risk management strategies using seasonal climate forecasting in irrigated cotton production: a tale of stochastic dominance," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(1), pages 65-93, March.
    • Handle: RePEc:bla:ajarec:v:48:y:2004:i:1:p:65-93
    DOI: 10.1111/j.1467-8489.2004.00236.x
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    2. Williams, Allyson & Mushtaq, Shahbaz & Kouadio, Louis & Power, Brendan & Marcussen, Torben & McRae, David & Cockfield, Geoff, 2018. "An investigation of farm-scale adaptation options for cotton production in the face of future climate change and water allocation policies in southern Queensland, Australia," Agricultural Water Management, Elsevier, vol. 196(C), pages 124-132.
    3. Yangxuan Liu & Michael R. Langemeier & Ian M. Small & Laura Joseph & William E. Fry & Jean B. Ristaino & Amanda Saville & Benjamin M. Gramig & Paul V. Preckel, 2018. "A Risk Analysis of Precision Agriculture Technology to Manage Tomato Late Blight," Sustainability, MDPI, vol. 10(9), pages 1-19, August.
    4. Ancev, Tihomir & Vervoort, Willem & Odeh, Inakwu O.A., 2004. "Economic Evaluation Of Watershed Management Options In The Irrigated Cotton Areas Of The Upper Murray-Darling Basin In New South Wales, Australia," 2004 Annual meeting, August 1-4, Denver, CO 20283, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Nguyen, Nam C. & Wegener, Malcolm K. & Russell, Iean W. & Cameron, Donald & Coventry, David & Cooper, Ian M., 2007. "Risk management strategies by Australian farmers: two case studies," AFBM Journal, Australasian Farm Business Management Network, vol. 4(1-2), pages 1-8.
    6. Gonzales, Kathrina G. & Predo, Canesio D. & de Guzman, Rosalina G. & Reyes, Celia M., 2010. "Assessing the Value of Seasonal Climate Forecasts on Farm-level Corn Production through Simulation Modeling," Philippine Journal of Development PJD 2009 Vol. XXXVI No. 1, Philippine Institute for Development Studies.
    7. Liu, Yangxuan & Langemeier, Michael & Small, Ian & Joseph, Laura & Fry, William, 2015. "Risk management strategies using potato precision farming technology," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205417, Agricultural and Applied Economics Association.
    8. N. Marshall & I. Gordon & A. Ash, 2011. "The reluctance of resource-users to adopt seasonal climate forecasts to enhance resilience to climate variability on the rangelands," Climatic Change, Springer, vol. 107(3), pages 511-529, August.
    9. Lee, Lisa Yu-Ting & Ancev, Tihomir & Vervoort, Willem, 2006. "Weighing Up the Cost: Economic Impact of Water Scarcity and Environmental Targets," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139878, Australian Agricultural and Resource Economics Society.
    10. Adamson, David, 2010. "Climate change, Irrigation and Pests: Examining Heliothis in the Murray Darling Basin," Risk and Sustainable Management Group Working Papers 149879, University of Queensland, School of Economics.
    11. Simone Severini & Cinzia Zinnanti & Valeria Borsellino & Emanuele Schimmenti, 2021. "EU income stabilization tool: potential impacts, financial sustainability and farmer’s risk aversion," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-21, December.

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