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Revenue volatility faced by Australian wheat farmers

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  • Kingwell, Ross S.

Abstract

This paper uses variance decomposition modelling to explore how wheat revenue volatility in Australia has changed spatially and temporally. The components of revenue variance are the variances and covariances of wheat prices, the area of wheat harvested and the yield of wheat. The key finding is that the volatility of wheat revenue (detrended) has more than doubled in every main wheat-growing State in Australia over the last 15 years or so Changes in wheat areas are mostly a minor source of revenue variance. The principal cause of volatility is yield changes with price changes increasing slightly in absolute importance when compared to their adjacent previous period. Greater downside yield risk is often the principal cause of the increased yield variance. The implications are that revenue variance, and especially downside revenue risk, has posed major problems for wheat-dominant farm businesses over the last 15 years or so. How Australia’s wheat producers have managed this greater volatility of wheat revenue is likely to have greatly affected the viability of their farm businesses.

Suggested Citation

  • Kingwell, Ross S., 2011. "Revenue volatility faced by Australian wheat farmers," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100572, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare11:100572
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    File URL: http://purl.umn.edu/100572
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    References listed on IDEAS

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    1. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611.
    2. John C. Quiggin & Jock R. Anderson, 1979. "Stabilisation And Risk Reduction In Australian Agriculture," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 23(3), pages 191-206, December.
    3. von Braun, Joachim & Torero, Maximo, 2009. "Exploring the Price Spike," Choices, Agricultural and Applied Economics Association, vol. 24(1).
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    Cited by:

    1. Lawes, R.A. & Kingwell, R.S., 2012. "A longitudinal examination of business performance indicators for drought-affected farms," Agricultural Systems, Elsevier, vol. 106(1), pages 94-101.
    2. Monjardino, M. & McBeath, T. & Ouzman, J. & Llewellyn, R. & Jones, B., 2015. "Farmer risk-aversion limits closure of yield and profit gaps: A study of nitrogen management in the southern Australian wheatbelt," Agricultural Systems, Elsevier, vol. 137(C), pages 108-118.
    3. Hutchings, Timothy R. & Nordblom, Thomas L., 2011. "A financial analysis of the effect of the mix of crop and sheep enterprises on the risk profile of dryland farms in south-eastern Australia," AFBM Journal, Australasian Farm Business Management Network, vol. 8(1).
    4. Monjardino, Marta & McBeath, T. & Brennan, Lisa E. & Llewellyn, Rick S., 2012. "Revisiting N fertilisation rates in low-rainfall grain cropping regions of Australia: A risk analysis," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124339, Australian Agricultural and Resource Economics Society.
    5. Hutchings, Timothy R. & Nordblom, Thomas L. & Hayes, Richard C. & Li, Guangdi & Finlayson, John D., 2016. "A framework for modelling financial risk in Southern Australia: the intensive farming (IF) model," 2016 Conference (60th), February 2-5, 2016, Canberra, Australia 235333, Australian Agricultural and Resource Economics Society.
    6. Hutchings, T.R., 2013. "Financial risk on dryland farms in south-eastern Australia," Dissertations-Doctoral 204434, AgEcon Search.

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    Keywords

    risk; wheat production; variance decomposition; wheat farming; Agribusiness;

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