ESTIMATING THE IMPACTS OF DIFFERING PRICE-RISK MANAGEMENT STRATEGIES ON THE NET INCOME OF SALINAS VALLEY LETTUCE PRODUCERS: A STOCHASTIC SIMULATION APPROACH

Roland J. Fumasi

No 36310, 2005 Annual Meeting, July 6-8, 2005, San Francisco, California from Western Agricultural Economics Association

Abstract: While government safety-net programs are used to mitigate the price risk for commodity producers, limited programs exist for specialty crop producers. Specialty crop producers utilize forward contracts to reduce downside price risk. In order to estimate the method of price-risk management, if any, that is preferable to selling at market determined prices, a stochastic simulation model was constructed. The completed simulation model was used to estimate probability distributions for Salinas Valley net income under different pricing scenarios. Probabilities of reaching various net income thresholds were compared. Results indicate that Salinas Valley lettuce producers should maximize profitability by using forward contracts.

Keywords: Farm Management; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 20
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ags:waeasa:36310

DOI: 10.22004/ag.econ.36310

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