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Response to price and production risk: The case of Australian wheat

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  • Alicia N. Rambaldi
  • Phil Simmons

Abstract

A model of Australian wheat grower supply response was specified under the constrainsts of price and yield uncertainty, risk aversion, partial adjustment, and quadratic costs. The model was solved to obtain area planted. The results of estimation indicate that risk arising from prices and climate have had a significant influence on producer decision making. The coefficient of relative risk aversion and short‐run and long‐run elasticities of supply with respect to price were calculated. Wheat growers' risk premium, expected at the start of the season for exposed price and yield risk, was 2.8 percent of revenue or 10.4 percent of profit as measured by producer surplus. © 2000 John Wiley & Sons, Inc. Jrl Fut Mark 20: 345–359, 2000.

Suggested Citation

  • Alicia N. Rambaldi & Phil Simmons, 2000. "Response to price and production risk: The case of Australian wheat," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 20(4), pages 345-359, April.
  • Handle: RePEc:wly:jfutmk:v:20:y:2000:i:4:p:345-359
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    Cited by:

    1. Bullock, David S. & Garcia, Philip & Shin, Kie-Yup, 2005. "Measuring producer welfare under output price uncertainty and risk non-neutrality," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), March.
    2. Benedicto Lukanima & Raymond Swaray, 2014. "Market Reforms and Commodity Price Volatility: The Case of East African Coffee Market," The World Economy, Wiley Blackwell, vol. 37(8), pages 1152-1185, August.
    3. G. Benavides & P. N. Snowden, 2006. "Futures for farmers: Hedging participation and the Mexican corn scheme," Journal of Development Studies, Taylor & Francis Journals, vol. 42(4), pages 698-712.
    4. Culas, Richard J., 2011. "Area response in wheat production: The Australian wheat-sheep zone," AFBM Journal, Australasian Farm Business Management Network, vol. 8(1).

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