Risk and the decision to produce biomass crops: a stochastic analysis
There is increasing interest in biomass crops as an alternative farm enterprise. However, given the relatively low uptake of these crops in Ireland, there is limited information concerning the risk associated with their production and its potential impact on returns. The uncertainty surrounding risky variables such as the costs of production, yield level, price per tonne and opportunity cost of land make it difficult to accurately calculate the returns to biomass crops. Their lengthy production lifespan may only serve to heighten the level of risk that affects key variables. A stochastic budgeting model is used to calculate the returns from willow and miscanthus. The opportunity cost of land is accounted for through the inclusion of the foregone returns from selected conventional agricultural activities. The potential for bioremediation to boost returns is also examined. The NPV of various biomass investment options are simulated to ascertain the full distribution of possible returns. The results of these simulations are then compared using their respective CDF’s and the investments are ranked using Stochastic Efficiency with Respect to a Function (SERF).
|Date of creation:||29 Mar 2010|
|Contact details of provider:|| Web page: http://www.aes.ac.uk/|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:aesc10:91955. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.