OPTIMAL POST-HARVEST GRAINS STORAGE BY RISK AVERSE FARMERS

Jing-Yi Lai, Robert Myers () and Steven D. Hanson

No 11739, Staff Paper Series from Michigan State University, Department of Agricultural, Food, and Resource Economics

Abstract: Most previous research on post-harvest grain storage by farmers has assumed risk-neutral behavior and/or made restrictive assumptions about underlying price probability distributions. In this study we solve the optimal post-harvest storage problem for a risk averse farmer under more general assumptions about underlying price distributions. The resulting model is applied to Michigan corn farmers and results show that, contrary to the sell all-or-nothing risk-neutral rule, risk averse farmers will spread sales out over the storage season. The optimal pattern for sales by Michigan corn farmers is to sell approximately 50% of corn at harvest in November (a risk-reduction strategy) and approximately 40% in May (a return-enhancing strategy).

Keywords: Crop; Production/Industries (search for similar items in EconPapers)
Pages: 33
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ags:midasp:11739

DOI: 10.22004/ag.econ.11739

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