Optimal Post-Harvest Grains Storage By Risk Averse Farmers
Most previous research on post-harvest grain storage by farmers has assumed risk-neutral behavior and/or made restrictive assumptions about underlying price probability distributions. In this study we solve the optimal post-harvest storage problem for a risk averse farmer under more general assumptions about underlying price distributions. The resulting model is applied to Michigan corn farmers and results show that, contrary to the sell all-or-nothing risk-neutral rule, risk averse farmers will spread sales out over the storage season. The optimal pattern for sales by Michigan corn farmers is to sell approximately 50% of corn at harvest in November (a risk-reduction strategy) and approximately 40% in May (a return-enhancing strategy).
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- Sartwelle, James D., III & O'Brien, Daniel M. & Tierney, William I., Jr. & Eggers, Tim, 2000. "The Effect Of Personal And Farm Characteristics Upon Grain Marketing Practices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(01), April.
- Steven D. Hanson & Robert J. Myers & J. Roy Black, 1998. "The Effects of Crop Yield Insurance Designs on Farmer Participation and Welfare," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 806-820.
- Lence, Sergio H. & Kimle, Kevin & Hayenga, Marvin L., 1993.
"A Dynamic Minimum Variance Hedge,"
Staff General Research Papers
10833, Iowa State University, Department of Economics.
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