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A Risk Analysis of Converting Conservation Reserve Program Acres to a Wheat–Sorghum–Fallow Rotation
Author(s) -
Williams Jeffery R.,
Llewelyn Richard V.,
Pendell Dustin L.,
Schlegel Alan,
Dumler Troy
Publication year - 2010
Publication title -
agronomy journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.752
H-Index - 131
eISSN - 1435-0645
pISSN - 0002-1962
DOI - 10.2134/agronj2009.0142
Subject(s) - tillage , sorghum , crop rotation , production (economics) , agronomy , conventional tillage , conservation reserve program , commodity , crop , agricultural economics , economics , agricultural science , agriculture , agroforestry , environmental science , biology , ecology , market economy , macroeconomics
This study examines the economic potential of producing a wheat ( Triticum aesitivum ) and grain sorghum ( Sorghum bicolor (L.) Moench ) rotation with three different tillage strategies (conventional, reduced, and no tillage) compared with the Conservation Reserve Program (CRP) in a semiarid region. This research uses enterprise budgeting and stochastic efficiency with respect to a function to determine the preferred management strategies under various risk preferences. Yields, input rates, and field operations from an experimental field in western Kansas are used to calculate net returns for each tillage strategy. Although net returns to crop production using reduced tillage and no‐tillage strategies with average crop prices for January 2007 through December 2008 are higher than CRP payments, risk analysis indicates that CRP would be the preferred strategy for more risk‐averse managers. When average crop prices for January 2006 through December 2008 are used, CRP payments are higher than returns from crop production. Based on this analysis, only individuals who are risk‐neutral or slightly risk‐averse would prefer crop production to continue CRP enrollment in this region unless commodity prices reach the historically high levels of late 2007 and early 2008 and remain there.