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Wheat Variety Selection to Maximize Returns and Minimize Risk: An Application of Portfolio Theory

Author

Listed:
  • Barkley, Andrew P.
  • Peterson, Hikaru Hanawa
  • Shroyer, James

Abstract

This research shows that a portfolio of wheat varieties could enhance profitability and reduce risk over the selection of a single variety for Kansas wheat producers. Many Kansas wheat farmers select varieties solely based on published average yields. This study uses portfolio theory from business investment analysis to find the optimal, yield-maximizing and risk-minimizing combination of wheat varieties in Kansas.

Suggested Citation

  • Barkley, Andrew P. & Peterson, Hikaru Hanawa & Shroyer, James, 2010. "Wheat Variety Selection to Maximize Returns and Minimize Risk: An Application of Portfolio Theory," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 42(1), pages 1-17, February.
    • Handle: RePEc:ags:joaaec:57152
    DOI: 10.22004/ag.econ.57152
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    Cited by:

    1. Burbano-Figueroa, Oscar & Sierra-Monroy, Alexandra & David-Hinestroza, Adriana & Whitney, Cory & Borgemeister, Christian & Luedeling, Eike, 2022. "Farm-planning under risk: An application of decision analysis and portfolio theory for the assessment of crop diversification strategies in horticultural systems," Agricultural Systems, Elsevier, vol. 199(C).
    2. Durai Sundaramoorthi & Lingxiu Dong, 2024. "Machine learning and optimization based decision-support tool for seed variety selection," Annals of Operations Research, Springer, vol. 341(1), pages 5-39, October.
    3. repec:ags:aoeisl:170464 is not listed on IDEAS
    4. Roberts, Shane & Brooks, Kathleen & Nogueira, Lia & Walters, Cory G., 2022. "The role of quality characteristics in pricing hard red winter wheat," Food Policy, Elsevier, vol. 108(C).
    5. Mortenson, Ryan & Parsons, Jay & Pendell, Dustin L. & Haley, Scott D., 2012. "Wheat Variety Selection: An Application of Portfolio Theory in Colorado," Western Economics Forum, Western Agricultural Economics Association, vol. 11(2), pages 1-12.
    6. Paydar, Z. & Qureshi, M.E., 2012. "Irrigation water management in uncertain conditions—Application of Modern Portfolio Theory," Agricultural Water Management, Elsevier, vol. 115(C), pages 47-54.
    7. Park, Seong Cheol & Cho, Jaesung & Bevers, Stanley J. & Amosson, Stephen H. & Rudd, Jackie C., 2012. "Dryland Wheat variety selection in the Texas High Plain," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119658, Southern Agricultural Economics Association.
    8. Jesse Tack & Andrew Barkley & Lawton Nalley, 2014. "Heterogeneous effects of warming and drought on selected wheat variety yields," Climatic Change, Springer, vol. 125(3), pages 489-500, August.
    9. Toth, Marian & Lancaric, Drahoslav & Piterkova, Andrea & Savov, Radovan & Rabek, Tomas, 2014. "Measuring Systematic Risk Of Unquoted Agricultural Farms," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 17(1), March.
    10. Maryam Nawaz & Shoaib Akhtar & Adnan Nazir & Muhammad Faisal, 2020. "Technical Efficiency and Its Determinants in Wheat Production: Evidence from Punjab, Pakistan," Journal of Economic Impact, Science Impact Publishers, vol. 2(1), pages 37-42.
    11. José Alex Gualotuña Parra & Omar Valverde-Arias & Ana M. Tarquis & Juan B. Grau Olivé & Federico Colombo Speroni & Antonio Saa-Requejo, 2023. "Combining Markowitz Portfolio Model and Simplex Algorithm to Achieve Sustainable Land Management Objectives: Case Study of Rivadavia Banda Norte, Salta (Argentina)," Sustainability, MDPI, vol. 15(14), pages 1-22, July.
    12. Tóth, M. & Lančarič, D. & Piterková, A. & Savov, R., 2014. "Systematic Risk in Agriculture: A Case of Slovakia," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 6(4), pages 1-9, December.
    13. Diersen, Matthew & Gurung, Pratik & Fausti, Scott, 2015. "Optimal Allocation of Index Insurance Intervals for Commodities," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196793, Southern Agricultural Economics Association.
    14. Mitter, Hermine & Heumesser, Christine & Schmid, Erwin, 2014. "Modelling robust crop production portfolios to assess agricultural vulnerability to climate change," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182702, European Association of Agricultural Economists.
    15. Qiuzhuo Ma & Krishna P Paudel & Liting Gu & Xiaowei Wen, 2018. "An application of a cardinality-constrained multiple benchmark tracking error model on a plant enterprise selection problem," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 45(5), pages 677-721.

    More about this item

    Keywords

    Agribusiness; Agricultural and Food Policy; Crop Production/Industries; Industrial Organization; Production Economics; Risk and Uncertainty;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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