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Alternative Strategies to Manage Weather Risk in Perennial Fruit Crop Production

Author

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  • Ho, Shuay-Tsyr
  • Ifft, Jennifer E.
  • Rickard, Bradley J.
  • Turvey, Calum G.

Abstract

Fruit producers in the Eastern United States face a wide range of weather-related risks during the growing season, and many of these events have the capacity to largely impact yields and profitability. This research examines the economic implications associated with responding to these risks for sweet cherry production in three different systems: using high tunnels to protect the crop, purchasing revenue insurance products, and employing weather insurance schemes. The analysis considers a distribution of revenue flows and costs using detailed price, yield, and weather data between 1984 and 2013. Our results show that the high tunnel system generates the largest net return if significant price premiums exist for earlier and larger fruit. Under most conditions, the results also indicate that net returns for the system that uses revenue-based crop insurance exceed those for the system that uses weather insurance products.

Suggested Citation

  • Ho, Shuay-Tsyr & Ifft, Jennifer E. & Rickard, Bradley J. & Turvey, Calum G., 2016. "Alternative Strategies to Manage Weather Risk in Perennial Fruit Crop Production," Working Papers 250036, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:250036
    DOI: 10.22004/ag.econ.250036
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    References listed on IDEAS

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    1. Richards, Timothy J. & Manfredo, Mark R., 2003. "Infrequent Shocks and Rating Revenue Insurance: A Contingent Claims Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(2), pages 1-19, August.
    2. Price, T. Jeffrey & Wetzstein, Michael E., 1999. "Irreversible Investment Decisions In Perennial Crops With Yield And Price Uncertainty," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), pages 1-13, July.
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    8. Fleege, Trevor A. & Richards, Timothy J. & Manfredo, Mark R. & Sanders, Dwight R., 2004. "The Performance Of Weather Derivatives In Managing Risks Of Specialty Crops," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19026, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    9. Belasco, Eric & Galinato, Suzette & Marsh, Tom & Miles, Carol & Wallace, Russell, 2013. "High Tunnels Are My Crop Insurance: An Assessment of Risk Management Tools for Small-scale Specialty Crop Producers," Agricultural and Resource Economics Review, Cambridge University Press, vol. 42(2), pages 403-418, August.
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    13. Alfons Weersink & Szu-Hsuan Celia Chiang, 2006. "Pricing Weather Insurance with a Random Strike Price: The Ontario Ice-Wine Harvest," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 696-709.
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    Cited by:

    1. Shuoli Zhao & Chengyan Yue, 2020. "Risk preferences of commodity crop producers and specialty crop producers: An application of prospect theory," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 359-372, May.
    2. Marco Rogna & Günter Schamel & Alex Weissensteiner, 2023. "Modelling the switch from hail insurance to antihail nets," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(1), pages 118-136, January.

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    Keywords

    Crop Production/Industries; Farm Management; Risk and Uncertainty;
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