Profitability of Irrigated Corn Production in Alabama: A Stochastic Analysis

Denis Nadolnyak

Journal of Agribusiness, 2021, vol. 39, issue 2

Abstract: Rising com prices and growing ethanol markets may intensify production practices. Relative abundance of water resources and predominance of rainfed com production in Alabama may trigger expansion of in-igation in the region. This paper reports results of analysis of producer decisions on switching to irrigated com production in North Alabama under different market conditions and producer characteristics. Simulated yield, production, and cost data are used in generating stochastic profit series. Simulation results show that the certainty equivalent profit premium from inigated production increases with output prices and risk aversion. For realistic parameter value ranges, com prices between $3 and $4 (roughly $4.40 and $5.90 in 2022) per bushel make investment in irrigation profitable.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ags:jloagb:401379

DOI: 10.22004/ag.econ.401379

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