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Area Allocation Under Price Uncertainty on Dutch Arable Farms
Author(s) -
Lansink Alfons Oude
Publication year - 1999
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1999.tb00797.x
Subject(s) - arable land , economics , econometrics , profit (economics) , convexity , price risk , resampling , curvature , mathematics , microeconomics , statistics , agriculture , geography , financial economics , geometry , archaeology , futures contract
This paper uses a Mean‐Variance utility function to build a dual model that simultaneously determines area allocation and production/input levels under output price uncertainty. Regularity conditions of the indirect utility function (convexity) and producers risk preferences are tested. The framework is applied to a rotating sample of Dutch arable farms. Dutch arable farmers are found to be risk averse, with the size of the risk premium given by 3 per cent of annual profit. A bootstrap resampling method shows that curvature conditions are rejected. Price elasticities are compared for an unrestricted model and for a model with curvature conditions being imposed.