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Technological and financial approaches to risk management in agriculture: an integrated approach

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  • Robert G. Chambers
  • John Quiggin

Abstract

In the present paper, risk-management problems where farmers manage risk both through production decisions and through the use of market-based and informal risk-management mechanisms are considered. It is shown that many of these problems share a common structure, and that a unified and informative treatment of a broad spectrum of risk-management tools is possible within a cost-minimisation framework, under minimal conditions on their objective functions. Fundamental results are derived that apply regardless of the producer's preference towards risks, using only the no-arbitrage condition that agricultural producers never forego any opportunity to lower costs without lowering returns. Copyright 2004 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd..

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  • Robert G. Chambers & John Quiggin, 2004. "Technological and financial approaches to risk management in agriculture: an integrated approach ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 199-223, June.
  • Handle: RePEc:bla:ajarec:v:48:y:2004:i:2:p:199-223
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    References listed on IDEAS

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    1. Bardsley, Peter & Abey, Arun & Davenport, Scott V., 1984. "The Economics Of Insuring Crops Against Drought," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 28(01), April.
    2. Chris Robinson & Pat J. McMahon & John C. Quiggin, 1982. "Labour Supply And Off‐Farm Work By Farmers: Theory And Estimation," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 26(1), pages 23-38, April.
    3. Chambers, Robert G. & Quiggin, John C., 2002. "Resource Allocation And Asset Pricing," Working Papers 28594, University of Maryland, Department of Agricultural and Resource Economics.
    4. Robert G. Chambers & John Quiggin, 2002. "Optimal Producer Behavior in the Presence of Area-Yield Crop Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 320-334.
    5. Quiggin, John C., 1986. "A Note On The Viability Of Rainfall Insurance," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 30(01), April.
    6. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448, March.
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    Citations

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    Cited by:

    1. David Adamson & Thilak Mallawaarachchi & John Quiggin, 2007. "Water use and salinity in the Murray-Darling Basin: A state-contingent model ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 263-281, September.
    2. Adamson, David & Mallawaarachchi, Thilak & Quiggin, John, 2004. "Modelling basin level allocation of water in the Murray Darling Basin in a world of uncertainty," Risk and Sustainable Management Group Working Papers 149844, University of Queensland, School of Economics.
    3. MacNicol, R. & Ortmann, Gerald F. & Ferrer, Stuart R.D., 2008. "Management decisions on commercial sugarcane farms in KwaZulu-Natal: a focus on choice bracketing behaviour for risk management," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), March.
    4. John Quiggin & Robert G. Chambers, 2004. "Drought policy: a graphical analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 225-251, June.
    5. John Quiggin & Robert G. Chambers, 2006. "The state-contingent approach to production under uncertainty ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 153-169, June.
    6. Abedullah & Mubaraik Ali, 2006. "Quantifying the Extent and Nature of Risk in Alternative Cropping Patterns in Claveria, Philippines," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(2), pages 261-280.
    7. C. J. O'Donnell & W. E. Griffiths, 2006. "Estimating State-Contingent Production Frontiers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 249-266.
    8. Best, Peter & Stone, Roger & Sosenko, Olena, 2007. "Climate risk management based on climate modes and indices - the potential in Australian agribusinesses," 101st Seminar, July 5-6, 2007, Berlin Germany 9257, European Association of Agricultural Economists.
    9. Uaiene, Rafael N., 2006. "Introduction of New Agricultural Technologies and Marketing Strategies in Central Mozambique," Food Security Collaborative Working Papers 55861, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    10. Musshoff, Oliver & Odening, Martin & Xu, Wei, 2005. "Zur Bewertung von Wetterderivaten als innovative Risikomanagementinstrumente in der Landwirtschaft," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 54(4).

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