Crop choice decision under uncertainty: a case study in Russia

Chetvertakov Sergey
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Chetvertakov Sergey: Institute of Farm Economics

Russian Journal of Agricultural and Socio-Economic Sciences, 2016, vol. 55, issue 7, 25-34

Abstract: The recent expansion in corn and soybean acreage in Russia raises interest regarding the reasons behind it. A previous study by the author revealed greater profitability of corn and soybeans than the most popular crop winter wheat. However, although shift to a corn-soybean rotation or even continuous corn is agronomically feasible, many farmers are not willing to take the related risks. Hence, the goal of this article is to derive the optimal crop portfolio accounting for relative risk aversion coefficients of farmers. On the basis of the stochastic simulation method, a new technique for risk optimization was developed. The findings indicate crop diversification is a good method to mitigate risk under Russian conditions. Only farmers preferring risk would switch to corn as a monocrop rotation.

Keywords: STOCHASTIC SIMULATION; CERTAINTY EQUIVALENTS; OPTIMIZATION; RISK; RUSSIA (search for similar items in EconPapers)
Date: 2016
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