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The impact of changes in the AgriStability program on crop activities: A farm modeling approach

Xuan Liu, Jun Duan and Gerrit van Kooten

Agribusiness, 2018, vol. 34, issue 3, 650-667

Abstract: To analyze the production impacts of changes made in 2013 to Canada's AgriStability risk management program, we calibrate a crop allocation model using positive mathematical programming (PMP). Because PMP is not straightforward if farmers are assumed to maximize expected utility (as a risk parameter also needs to be calibrated), we consider possible ways to address this issue but settle on a traditional approach used in the EU's Farm System Simulator. We calibrate farm management models for six different Alberta regions and use it to determine how changes in the AgriStability's payment trigger affect production incentives. Results indicate that, although the initial introduction of the AgriStability program in 2008 might have tilted farmers’ planting decisions toward crops with higher returns and greater risk, changes to this program reduce indemnities and farmers’ expected profits, but do not further alter land‐use decisions. Rather, it is increases in farmers’ aversion to risk that lead to the greatest changes in crop allocation. [EconLit citations: Q14, Q18, C61].

Date: 2018
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Handle: RePEc:wly:agribz:v:34:y:2018:i:3:p:650-667