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Estimating The Impacts Of Differing Price-Risk Management Strategies On The Net Income Of Salinas Valley Lettuce Producers: A Stochastic Simulation Approach

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  • Fumasi, Roland J.
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    While government safety-net programs are used to mitigate the price risk for commodity producers, limited programs exist for specialty crop producers. Specialty crop producers utilize forward contracts to reduce downside price risk. In order to estimate the method of price-risk management, if any, that is preferable to selling at market determined prices, a stochastic simulation model was constructed. The completed simulation model was used to estimate probability distributions for Salinas Valley net income under different pricing scenarios. Probabilities of reaching various net income thresholds were compared. Results indicate that Salinas Valley lettuce producers should maximize profitability by using forward contracts.

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    Paper provided by Western Agricultural Economics Association in its series 2005 Annual Meeting, July 6-8, 2005, San Francisco, California with number 36310.

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    Date of creation: 2005
    Handle: RePEc:ags:waeasa:36310
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    1. Cowan, Robin & Gunby, Philip, 1996. "Sprayed to Death: Path Dependence, Lock-In and Pest Control Strategies," Economic Journal, Royal Economic Society, vol. 106(436), pages 521-542, May.
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    7. Rosson, C. Parr, III, 2012. "C. Parr Rosson," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 44(03), August.
    8. Menkhaus, Dale J. & Bastian, Chris T. & Phillips, Owen R. & O'Neill, Patrick D., 2000. "Supply and Demand Risks in Laboratory Forward and Spot Markets: Implications for Agriculture," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 32(01), pages 159-173, April.
    9. Miguel Carriquiry & Bruce A. Babcock, 2002. "Can Spot and Contract Markets Co-Exist in Agriculture?," Center for Agricultural and Rural Development (CARD) Publications 02-wp311, Center for Agricultural and Rural Development (CARD) at Iowa State University.
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