Spatial and Temporal On-Farm Risk Management - Crop Production Scheduling and Index Insurance Strategies

Shanshan Lin, Jeffrey Mullen and Gerrit Hoogenboom

No 49350, 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin from Agricultural and Applied Economics Association

Abstract: An agronomic crop growth model, Decision Support System for Agro-Technology Transfer (DSSAT), is used to find optimal crop management strategies for cotton production in Mitchell, Miller, and Lee Counties in Georgia during the past 10 years. Planting date and irrigation threshold are the two variables optimized to maximize farmer's expected utility. A decreasing absolute risk aversion - constant relative risk aversion (DARA-CRRA) utility function is used to examine crop management decision that can be influenced by changes in inter-temporal risk behavior. Comparison is made from management perspective - one is dynamic crop management strategy that varies each year; one is static (constant) strategy over 10 years. Based on the best crop management strategies, index insurance products are designed to help farmers further reduce production risk. The impact of geographical basis risk was assessed by comparing the risk reduction generated from index insurance contracts based on different weather stations; the impact of temporal basis risk is assessed by allowing separate contracts to be purchased for different sub-periods during the entire period.

Keywords: Agribusiness; Agricultural Finance; Crop Production/Industries; Farm Management; Financial Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 29
Date: 2009
New Economics Papers: this item is included in nep-agr, nep-ias, nep-rmg and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea09:49350

DOI: 10.22004/ag.econ.49350

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