Transition to Organic Cropping Systems under Risk

David W. Archer and Hillarius Kludze

No 21278, 2006 Annual meeting, July 23-26, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: We analyze the risks, returns and optimal adoption strategies for a representative Minnesota farm switching from conventional to organic cropping systems. The EPIC simulation model was calibrated based on the yields observed in a farming systems field study. A farm-level simulation model was constructed using the EPIC simulated crop yields and historical prices. Results were compared for an expected utility maximizing farm under a range of risk aversion levels, with and without management learning curves and biological transition effects. A dynamic programming model was then constructed to evaluate the joint effects of machinery replacement decisions, learning curves, and biological transition effects on optimal adoption strategies. Results show that producers will find it optimal to transition to organic systems as rapidly as possible, even with significant learning curves and machinery adjustment costs.

Keywords: Risk; and; Uncertainty (search for similar items in EconPapers)
Pages: 24
Date: 2006
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea06:21278

DOI: 10.22004/ag.econ.21278

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