IDEAS home Printed from https://ideas.repec.org/p/ags/iaae06/25400.html

Farm Level Risk Assessment Using Downside Risk Measures

Author

Listed:
  • Berg, Ernst
  • Starp, Michael

Abstract

Recent and presumable future developments tend to increase the risk associated with farming activities. This causes an increasing importance of risk management. Farmers have a wide variety of possibilities to influence the risk exposure of their operations. Among them are the choice of the production program as well as marketing activities including forward pricing and hedging with futures and options. In total all these opportunities comprise a portfolio of activities which must be selected as to match the resources of the farm as well as the farmer's attitudes towards risk. The paper addresses this issue using a whole farm stochastic optimisation approach based on a risk-value framework. The paper starts with a discussion of risk-value models and the relationship between them and the expected utility hypothesis. In the second part the approach is incorporated in a whole farm model that optimizes a portfolio of production activities and risk management instruments. A case study is used to analyse the possibilities and limitations of the approach and to illustrate the effects of yield and production risk on decision making.

Suggested Citation

  • Berg, Ernst & Starp, Michael, 2006. "Farm Level Risk Assessment Using Downside Risk Measures," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25400, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae06:25400
    DOI: 10.22004/ag.econ.25400
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/25400/files/cp060816.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.25400?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sarin, Rakesh K. & Weber, Martin, 1993. "Risk-value models," European Journal of Operational Research, Elsevier, vol. 70(2), pages 135-149, October.
    2. Fishburn, Peter C, 1977. "Mean-Risk Analysis with Risk Associated with Below-Target Returns," American Economic Review, American Economic Association, vol. 67(2), pages 116-126, March.
    3. repec:ags:agsaem:288652 is not listed on IDEAS
    4. Hardaker, J. Brian, 2000. "Some Issues in Dealing with Risk in Agriculture," Working Papers 12912, University of New England, School of Economics.
    5. Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, in: Robert Evenson & Prabhu Pingali (ed.), Handbook of Agricultural Economics, edition 1, volume 3, chapter 44, pages 2343-2378, Elsevier.
    6. Anderson, Jock R. & Dillon, John L. & Hardaker, Brian, 1977. "Agricultural Decision Analysis," Monographs: Applied Economics, AgEcon Search, number 288652.
    7. Mark R. Manfredo & Raymond M. Leuthold, 1999. "Value-at-Risk Analysis: A Review and the Potential for Agricultural Applications," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 21(1), pages 99-111.
    8. Albrecht, Peter & Maurer, Raimond & Möller, Matthias, 1997. "Shortfall-Risiko/Excess-Chance-Entscheidungskalküle: Grundlagen und Beziehungen zum Bernoulli-Prinzip," Sonderforschungsbereich 504 Publications 97-17, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Berg, Ernst & Schmitz, Bernhard, 2007. "Weather-based instruments in the context of whole farm risk management," 101st Seminar, July 5-6, 2007, Berlin Germany 9269, European Association of Agricultural Economists.
    2. Predrag Rajsic & Alfons Weersink & Markus Gandorfer, 2009. "Risk and Nitrogen Application Levels," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(2), pages 223-239, June.
    3. Elizabeth Anne Yeager & Michael R. Langemeier, 2013. "Economic efficiency and downside risk," Applied Economics, Taylor & Francis Journals, vol. 45(36), pages 5012-5020, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wallace, Garry E. & Samsul Huda, A.K., 2005. "Using climate information to approximate the value at risk of a forward contracted canola crop," AFBM Journal, Australasian Farm Business Management Network, vol. 2(01), pages 1-9.
    2. Berg, Ernst & Schmitz, Bernhard, 2007. "Weather-based instruments in the context of whole farm risk management," 101st Seminar, July 5-6, 2007, Berlin Germany 9269, European Association of Agricultural Economists.
    3. Anderson, Kim B. & Mapp, Harry P., Jr., 1996. "Risk Management Programs In Extension," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(01), pages 1-8, July.
    4. Serrao, Amilcar & Coelho, Luis, 2004. "Cumulative Prospect Theory: A Study Of The Farmers' Decision Behavior In The Alentejo Dryland Region Of Portugal," 2004 Annual meeting, August 1-4, Denver, CO 20245, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Randall Jones & Oscar Cacho & Jack Sinden, 2006. "The importance of seasonal variability and tactical responses to risk on estimating the economic benefits of integrated weed management," Agricultural Economics, International Association of Agricultural Economists, vol. 35(3), pages 245-256, November.
    6. Brogan, Anita J. & Stidham Jr., Shaler, 2008. "Non-separation in the mean-lower-partial-moment portfolio optimization problem," European Journal of Operational Research, Elsevier, vol. 184(2), pages 701-710, January.
    7. Gomez-Limon, Jose Antonio & Riesgo, Laura & Arriaza Balmón, Manuel, 2003. "Multi-Criteria Analysis Of Factors Use Level: The Case Of Water For Irrigation," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25836, International Association of Agricultural Economists.
    8. Hammida, Mustapha & Eidman, Vernon R., 1991. "Livestock And Poultry Production Risk In The United States," Staff Papers 14016, University of Minnesota, Department of Applied Economics.
    9. Lien, Gudbrand, 2002. "Non-parametric estimation of decision makers' risk aversion," Agricultural Economics, Blackwell, vol. 27(1), pages 75-83, May.
    10. Gempesaw, Conrado M., II & Tambe, A.M. & Nayga, Rodolfo M., Jr. & Toensmeyer, Ulrich C., 1988. "The Single Index Market Model In Agriculture," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 17(2), pages 1-9, October.
    11. Musser, Wesley N. & Tew, Bernard V., 1984. "Use Of Biophysical Simulation In Production Economics," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 16(01), pages 1-10, July.
    12. Bennett, Anne L. & Pannell, David J., 1998. "Economic evaluation of a weed-activated sprayer for herbicide application to patchy weed populations," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(4), pages 1-20.
    13. Gollin, Douglas, 2006. "Impacts of International Research on Intertemporal Yield Stability in Wheat and Maize: An Economic Assessment," Impact Studies 7657, CIMMYT: International Maize and Wheat Improvement Center.
    14. George Baourakis & Michael Doumpos & Nikos Kalogeras & Constantin Zopounidis, 2002. "Multicriteria analysis and assessment of financial viability of agribusinesses: The case of marketing co-operatives and juice-producing companies," Agribusiness, John Wiley & Sons, Ltd., vol. 18(4), pages 543-558.
    15. Anderson, Kim B. & Ikerd, John E., 1985. "Whole Farm Risk-Rating Microcomputer Model," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 17(01), pages 1-5, July.
    16. Kaylen, Michael S. & Devino, Gary T. & Procter, Michael H., 1988. "Optimal Use Of Qualitative Models: An Application To Country Grain Elevator Bankruptcies," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 20(2), pages 1-7, December.
    17. Perry, Gregory M. & Rister, M. Edward & Richardson, James W. & Grant, Warren R., 1986. "Analyzing Tenure Arrangements and Crop Rotations Using Farm Simulation and Probit Analysis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 18(2), pages 165-174, December.
    18. Boggess, William G. & Anaman, Kwabena A. & Hanson, Gregory D., 1985. "Importance, Causes, And Management Responses To Farm Risks: Evidence From Florida And Alabama," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 17(2), pages 1-12, December.
    19. Catacutan, Delia & Bertomeu, Manuel & Arbes, Lyndon & Duque, Caroline & Butra, Novie, 2008. "Fluctuating fortunes of a collective entreprise: The case of the Agroforestry Tree Seeds Association of Lantapan (ATSAL) in the Philippines," CAPRi working papers 76, International Food Policy Research Institute (IFPRI).
    20. Norton, George W. & Alwang, Jeffrey, 1997. "Policy for Plenty: Measuring the Benefits of Policy-oriented Social Science Research," Staff Papers 232552, Virginia Polytechnic Institute and State University, Department of Agricultural and Applied Economics.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:iaae06:25400. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/iaaeeea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.