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Spatial Yield Risk Across Region, Crop and Aggregation Method

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  • Michael Popp
  • Margot Rudstrom
  • Patrick Manning

Abstract

A researcher interested in crop yield risk analysis often has to contend with a lack of field‐ or farm‐level data. While spatially aggregated yield data are often readily available from various agencies, aggregation distortions for farm‐level analysis may exist. This paper addresses how much aggregation distortion might be expected and whether findings are robust across wheat, canola and flax grown in two central Canadian production regions, differing mainly by rainfall, frost‐free growing days and soil type. Using Manitoba Crop Insurance Corporation data from 1980 to 1990, this research, regardless of crop or region analyzed, indicates that (i) spatial patterns in risk are absent; (ii) use of aggregate data overwhelmingly under‐estimates field‐level yield risk; and (iii) use of a relative risk measure compared to an absolute risk measure leads to slightly less aggregation distortion. Analysts interested in conducting farm‐level analysis using aggregate data are offered a range of adjustment factors to adjust for potential bias. Un chercheur qui s'intéresse à l'analyse du risque du rendement des cultures doit souvent composer avec un manque de micro‐données provenant de l'exploitation. Bien qu'il soit possible d'obtenir des données sur les rendements spatialement cumulées auprès de divers organismes, ces données peuvent comporter des distorsions importantes dues à l'agrégation des données de base et être trompeuses si elles sont utilisées pour effectuer des analyses à l'échelle de l'exploitation. Le présent article traite de la quantité de distorsion due à l'agrégation à laquelle on doit s'attendre et examine si les résultats obtenus pour le blé, le canola et le lin dans deux principales régions productrices canadiennes, où les précipitations, les jours de croissance sans gel et le type de sol constituent les principales différences, sont robustes ou non. À l'aide des données obtenues auprès de la Société d'assurance‐récolte du Manitoba pour la période 1980–1990, la présente étude, sans égard à la culture ou à la région analysée, indique (i) que les profils régionaux en matière de risque n'existent pas; (ii) que l'utilisation de données agrégées sous‐estime considérablement le risque de rendement; (iii) que l'utilisation d'une mesure du risque relatif comparativement à une mesure du risque absolu entraîne légèrement moins de distorsion d'agrégation. Afin d'ajuster les données pour minimiser un biais éventuel, nous proposons une gamme de facteurs d'ajustement aux analystes intéressés à effectuer des analyses à l'échelle des exploitations à l'aide de données agrégées.

Suggested Citation

  • Michael Popp & Margot Rudstrom & Patrick Manning, 2005. "Spatial Yield Risk Across Region, Crop and Aggregation Method," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 53(2‐3), pages 103-115, June.
  • Handle: RePEc:bla:canjag:v:53:y:2005:i:2-3:p:103-115
    DOI: 10.1111/j.1744-7976.2005.00408.x
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    1. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economic Reports 34081, United States Department of Agriculture, Economic Research Service.
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    3. Fulton, Joan R. & King, Robert P. & Fackler, Paul L., 1988. "Combining Farm And County Data To Construct Farm Level Yield Distributions," Staff Papers 13752, University of Minnesota, Department of Applied Economics.
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    2. Peter Slade, 2021. "The impact of price hedging on subsidized insurance: Evidence from Canada," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(4), pages 447-464, December.
    3. Arora, Gaurav & Agarwal, Sandip K., 2020. "Agricultural input use and index insurance adoption: Concept and evidence," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304508, Agricultural and Applied Economics Association.
    4. Zhiwei Shen & Martin Odening, 2013. "Coping with systemic risk in index-based crop insurance," Agricultural Economics, International Association of Agricultural Economists, vol. 44(1), pages 1-13, January.
    5. Schmidt, Lorenz & Odening, Martin & Schlanstein, Johann & Ritter, Matthias, 2022. "Exploring the weather-yield nexus with artificial neural networks," Agricultural Systems, Elsevier, vol. 196(C).
    6. Li, Xiaofei & Tack, Jesse B. & Coble, Keith H. & Barnett, Barry J., 2016. "Can Crop Productivity Indices Improve Crop Insurance Rates?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235750, Agricultural and Applied Economics Association.
    7. Baylis, Katherine R. & Paulson, Nicholas D. & Piras, Gianfranco, 2011. "Spatial Approaches to Panel Data in Agricultural Economics: A Climate Change Application," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 43(3), pages 1-14, August.
    8. Hennessy, David A., 2009. "Crop Yield Skewness and the Normal Distribution," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(1), pages 1-19, April.
    9. Finger, Robert, 2012. "Biases in Farm-Level Yield Risk Analysis due to Data Aggregation," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 61(01), pages 1-14, February.
    10. Santeramo, Fabio Gaetano & Maccarone, Irene, 2022. "Analisi storica delle rese agricole e la variabilità del clima: Analisi dei dati italiani sui cereali [Historical crop yields and climate variability: analysis of Italian cereal data]," MPRA Paper 114135, University Library of Munich, Germany, revised 04 Aug 2022.
    11. Christopher N. Boyer & B. Wade Brorsen & Emmanuel Tumusiime, 2015. "Modeling skewness with the linear stochastic plateau model to determine optimal nitrogen rates," Agricultural Economics, International Association of Agricultural Economists, vol. 46(1), pages 1-10, January.
    12. Juan He & Roderick Rejesus & Xiaoyong Zheng & Jose Yorobe, 2018. "Advantageous Selection in Crop Insurance: Theory and Evidence," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(3), pages 646-668, September.
    13. Finger, Robert, 2012. "Biases in Farm-Level Yield Risk Analysis due to Data Aggregation," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 61(1).
    14. Severini, Simone & Tantari, Antonella & Di Tommaso, Giuliano, 2016. "The instability of farm income. Empirical evidences on aggregation bias and heterogeneity among farm groups," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(1), pages 1-19, April.
    15. Jindřich Špička & Václav Vilhelm, 2013. "Determinants of the Risk Environment in Agricultural Enterprises in the Czech Republic [Determinanty rizikového prostředí zemědělských podniků v České republice]," Acta Oeconomica Pragensia, Prague University of Economics and Business, vol. 2013(2), pages 69-87.
    16. Schmidt, Lorenz & Odening, Martin & Schlanstein, Johann & Ritter, Matthias, 2021. "Estimation of the Farm-Level Yield-Weather-Relation Using Machine Learning," 61st Annual Conference, Berlin, Germany, September 22-24, 2021 317075, German Association of Agricultural Economists (GEWISOLA).
    17. Joseph Cooper & Carl Zulauf & Michael Langemeier & Gary Schnitkey, 2012. "Implications of within county yield heterogeneity for modeling crop insurance premiums," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(1), pages 134-155, May.
    18. Jindřich Špička, 2009. "The Risk Analysis in the Agricultural Enterprises using Earnings at Risk Method," Ekonomika a Management, Prague University of Economics and Business, vol. 2009(3).

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