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Revenue volatility faced by Australian wheat farmers

  • Kingwell, Ross S.
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    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.

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    File URL: http://purl.umn.edu/100572
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    Paper provided by Australian Agricultural and Resource Economics Society in its series 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia with number 100572.

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    Date of creation: 2011
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    Handle: RePEc:ags:aare11:100572
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    1. von Braun, Joachim & Torero, Maximo, 2009. "Exploring the Price Spike," Choices, Agricultural and Applied Economics Association, vol. 24(1).
    2. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611, April.
    3. Quiggin, John C. & Anderson, Jock R., 1979. "Stabilisation And Risk Reduction In Australian Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 23(03), December.
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