Measurement of Importance of Risk on Supply Response of Corn and Soybeans

W.L. Nieuwoudt, Abner W. Womack and Stanley R. Johnson

Review of Agricultural Economics, 1988, vol. 10, issue 2, 281-292

Abstract: Risk response was included at the aggregate level in positive supply models for corn and soybeans. The welfare cost of risk was measured, allowing for interactions between product demand and supply functions as well as in the risk specification. Impacts of risk response are simulated within a simultaneous equation modeling system. Findings indicate that consumers gain but producers lose from reduction in risk. The social cost of risk as a percentage of the value of the crop was estimated for corn and soybeans at 0.36 percent and 0.35 percent, respectively.

Date: 1988
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