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Alternative Measures of Risk in Commodity Supply Models: An Analysis of Sow Farrowing Decisions in the United States

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  • Holt, Matthew T.
  • Moschini, Giancarlo

Abstract

The role of price risk in sow farrowings is investigated by using bivariate ARCH-M and GARCH-M models and a nonparametric kernel estimator. To account for the relevant time horizon of irreversible supply decisions, predictions for mean price and conditional price variance are iterated forward. The empirical results vary markedly in terms of their implications for risk response in hog supply decisions, with the ARCH-M and GARCH-M models suggesting a small and negative risk effect. Estimates of the marginal risk premium also indicate moderate and variable departures from marginal cost pricing in sow far­ rowing supply decisions.

Suggested Citation

  • Holt, Matthew T. & Moschini, Giancarlo, 1992. "Alternative Measures of Risk in Commodity Supply Models: An Analysis of Sow Farrowing Decisions in the United States," ISU General Staff Papers 199207010700001160, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:199207010700001160
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    1. Pagan, Adrian R. & Schwert, G. William, 1990. "Alternative models for conditional stock volatility," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 267-290.
    2. Aman Ullah, 1988. "Non-parametric Estimation of Econometric Functionals," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 625-658, August.
    3. Engle, Robert F. & Ng, Victor K. & Rothschild, Michael, 1990. "Asset pricing with a factor-arch covariance structure : Empirical estimates for treasury bills," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 213-237.
    4. Giancarlo Moschini, 1990. "Nonparametric and Semiparametric Estimation: An Analysis of Multiproduct Returns to Scale," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 589-596.
    5. Holt, Matthew & Aradhyula, Satheesh V., 1990. "Price Risk in Supply Equations: An Application of Garch Time-Series Models to the U.S. Broiler Market," Staff General Research Papers Archive 276, Iowa State University, Department of Economics.
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    Cited by:

    1. Haigh, Michael S. & Bryant, Henry L., 2001. "The effect of barge and ocean freight price volatility in international grain markets," Agricultural Economics, Blackwell, vol. 25(1), pages 41-58, June.
    2. Pope, Rulon D. & LaFrance, Jeffrey T. & Just, Richard E., 2011. "Agricultural arbitrage and risk preferences," Journal of Econometrics, Elsevier, vol. 162(1), pages 35-43, May.
    3. Mathews, Kenneth H., Jr. & Short, Sara D., 2001. "The Beef Cow Replacement Decision," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 19(2), pages 1-21.
    4. Ward, Patrick S. & Singh, Vartika, 2013. "Risk and Ambiguity Preferences and the Adoption of New Agricultural Technologies: Evidence from Field Experiments in Rural India," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150794, Agricultural and Applied Economics Association.
    5. Bullock, David S. & Garcia, Philip & Shin, Kie-Yup, 2005. "Measuring producer welfare under output price uncertainty and risk non-neutrality," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(1), pages 1-21.
    6. James Rude & Yves Surry, 2014. "Canadian Hog Supply Response: A Provincial Level Analysis," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(2), pages 149-169, June.
    7. Holt, Matthew T., 1994. "Price-Band Stabilization Programs And Risk: An Application To The U.S. Corn Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-16, December.
    8. Mbaga, Msafiri Daudi & Coyle, Barry T., 2003. "Beef Supply Response Under Uncertainty: An Autoregressive Distributed Lag Model," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(3), pages 1-21, December.
    9. Haigh, Michael S. & Bryant, Henry L., 2000. "Price And Price Risk Dynamics In Barge And Ocean Freight Markets And The Effects On Commodity Trading," 2000 Conference, April 17-18 2000, Chicago, Illinois 18934, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    10. Bahareh Mosadegh Sedghy & Rémy Lambert & Lota Dabio Tamini, 2016. "Supply response of corn farmers in Quebec: Analyzing the impact of prices volatility?," Cahiers de recherche CREATE 2016-1, CREATE.
    11. Michael S. Haigh & Henry L. Bryant, 2000. "The effect of barge and ocean freight price volatility in international grain markets," Agricultural Economics, International Association of Agricultural Economists, vol. 25(1), pages 41-58, June.
    12. Rezitis, Anthony N. & Stavropoulos, Konstantinos S., 2010. "Modeling beef supply response and price volatility under CAP reforms: The case of Greece," Food Policy, Elsevier, vol. 35(2), pages 163-174, April.
    13. Bard, Sharon K. & Barry, Peter J., 2001. "Assessing Farmers' Attitudes Toward Risk Using The "Closing-In" Method," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-13, July.
    14. Holt, Matthew T. & Aradhyula, Satheesh V., 1998. "Endogenous risk in rational-expectations commodity models: A multivariate generalized ARCH-M approach," Journal of Empirical Finance, Elsevier, vol. 5(2), pages 99-129, June.
    15. Tristan Le Cotty & Elodie Maître d'Hôtel & Moctar Ndiaye & Sophie Thoyer, 2016. "Output price risk and fertilizer use decisions in Burkina Faso," Post-Print hal-01419764, HAL.
    16. Arnade, Carlos Anthony & Cooper, Joseph C., 2012. "Acreage Response under Varying Risk Preferences," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(3), pages 1-17.
    17. Anthony N. Rezitis & Konstantinos S. Stavropoulos, 2010. "Supply response and price volatility in the Greek broiler market," Agribusiness, John Wiley & Sons, Ltd., vol. 26(1), pages 25-48.

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