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Policy and risk implications for an individual grain farm
Author(s) -
Dayton Jim,
Baldwin E. Dean
Publication year - 1989
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/1520-6297(198903)5:2<181::aid-agr2720050209>3.0.co;2-d
Subject(s) - futures contract , position (finance) , economics , risk management , agriculture , financial risk , financial risk management , yield (engineering) , distribution (mathematics) , crop insurance , econometrics , agricultural economics , business , actuarial science , finance , mathematics , mathematical analysis , materials science , metallurgy , ecology , biology
Farmers should include risk in their marketing, management, and financial plan. This article describes a conceptual model of risk and a microcomputer model, presents output for a hypothetical farm and examines the effects of agricultural policy and futures price, basis and crop yield risk on the financial probability distribution. The model should be solved for specific farms; conclusions should not be based on averages. Although participation in agricultural programs improves the financial position for a farm, price signals among grain are distorted causing a misallocation of resources. Financial survival distributions vary with size of risk coefficients.