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Area Allocation Under Price Uncertainty on Dutch Arable Farms

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  • Alfons Oude Lansink

Abstract

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.

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  • Alfons Oude Lansink, 1999. "Area Allocation Under Price Uncertainty on Dutch Arable Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 93-105, January.
    • Handle: RePEc:bla:jageco:v:50:y:1999:i:1:p:93-105
    DOI: 10.1111/j.1477-9552.1999.tb00797.x
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    1. Roche, M. & McQuinn, K., 2003. "Efficient allocation of land in a decoupled world," Economics Department Working Paper Series n1190103, Department of Economics, National University of Ireland - Maynooth.
    2. Sckokai, Paolo & Moro, Daniele & Platoni, Silvia, 2008. "Farm-Level Data Model For Agricultural Policy Analysis: A Two-Way Ecm Approach," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6693, European Association of Agricultural Economists.
    3. Rezwanul Parvez & David C Roberts & David Ripplinger, 2017. "Factors Impacting Crop Acreage Decision: A Case Study of North Dakota Agriculture," Agricultural Development, Sophia, vol. 1(1), pages 16-36.
    4. Britz, Wolfgang & Linda, Arata, "undated". "How Important Are Crop Shares In Managing Risk For Specialized Arable Farms? A Panel Estimation Of A Programming Model For Three European Regions," 56th Annual Conference, Bonn, Germany, September 28-30, 2016 244801, German Association of Agricultural Economists (GEWISOLA).
    5. Magrini, Emiliano & Morales-Opazo, Cristian & Balie, Jean, 2014. "Supply response along the value chain in selected SSA countries: the case of grains," 2014: Food, Resources and Conflict, December 7-9, 2014. San Diego, California 197193, International Agricultural Trade Research Consortium.
    6. Haile, Mekbib G. & Kalkuhl, Matthias & von Braun, Joachim, 2013. "Short-term global crop acreage response to international food prices and implications of volatility," Discussion Papers 145308, University of Bonn, Center for Development Research (ZEF).
    7. Bezemer, Dirk J., 2004. "Risk and agricultural de-collectivisation, with evidence from the Czech Republic," Economic Systems, Elsevier, vol. 28(1), pages 13-33, March.
    8. Maurice J. Roche & Kieran McQuinn, 2003. "Grain price volatility in a small open economy," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 30(1), pages 77-98, March.
    9. Carpentier, Alain & Gohin, Alexandre & Sckokai, Paolo & Thomas, Alban, 2015. "Economic modelling of agricultural production: past advances and new challenges," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 96(01), pages 131-165, March.
    10. Mary, Sebastien & Santini, Fabien & Boulanger, Pierre, 2013. "An Ex-Ante Assessment of CAP Income Stabilisation Payments using a Farm Household Model," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158860, Agricultural Economics Society.
    11. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    12. Hardaker, J. Brian & Lien, Gudbrand, 2010. "Probabilities for decision analysis in agriculture and rural resource economics: The need for a paradigm change," Agricultural Systems, Elsevier, vol. 103(6), pages 345-350, July.
    13. Matthias Kalkuhl & Mekbib Haile & Lukas Kornher & Marta Kozicka, 2015. "Cost-benefit framework for policy action to navigate food price spikes. FOODSECURE Working Paper No 33," FOODSECURE Working papers 33, LEI Wageningen UR.
    14. Abdullahi Abdulkadri & Michael Langemeier & Allen Featherstone, 2006. "Estimating economies of scope and scale under price risk and risk aversion," Applied Economics, Taylor & Francis Journals, vol. 38(2), pages 191-201.
    15. Feinerman, Eli & Gardebroek, Cornelis, 2005. "Stimulating Organic Farming Via Public Services and an Auction-Based Subsidy," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24723, European Association of Agricultural Economists.
    16. Boyle, Gerry & Conniffe, Denis & McQuinn, Kieran, 2005. "A New Mean Standard Deviation Utility Function and the Behaviour Towards Risk of Specialist Irish Agricultural Producers: 1988-1997," Research Technical Papers 5/RT/05, Central Bank of Ireland.
    17. Yao, Ling & Chen, Qihui & Wu, Laping, 2018. "Heterogeneous supply response: Does high price expectation attenuate the inverse farm size-productivity relationship in China?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274363, Agricultural and Applied Economics Association.
    18. Benjamin Dequiedt & Emmanuel Servonnat, 2016. "Risk as a limit or an opportunity to mitigate GHG emissions? The case of fertilisation in agriculture," Working Papers 1606, Chaire Economie du climat.
    19. Sckokai, Paolo & Moro, Daniele, 2002. "Modelling The Cap Arable Crop Regime Under Uncertainty," 2002 Annual meeting, July 28-31, Long Beach, CA 19860, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. Boere, Esther & Peerlings, Jack H.M. & Reinhard, Stijn & Kuhlman, Tom & Heijman, Wim J.M., 2012. "Effects of volatile output prices on agricultural land-use change," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122472, European Association of Agricultural Economists.
    21. Zhang, Lichun & McErlean, Seamus & Patton, Myles, 2010. "Impact of Risk within the Northern Ireland Dairy Sector," 84th Annual Conference, March 29-31, 2010, Edinburgh, Scotland 91802, Agricultural Economics Society.
    22. Mekbib G. Haile & Matthias Kalkuhl & Joachim Braun, 2014. "Inter- and intra-seasonal crop acreage response to international food prices and implications of volatility," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 693-710, November.
    23. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "How does food supply respond to high and volatile international food prices? An empirical evaluation of inter- and intra- seasonal global crop acreage response," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161472, African Association of Agricultural Economists (AAAE).
    24. Platoni, Silvia & Sckokai, Paolo & Moro, Daniele, 2008. "Panel Data Estimation Techniques for Farm-level Data Model," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44268, European Association of Agricultural Economists.
    25. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "Inter-and intra-annual global crop acreage response to prices and price risk," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149695, Agricultural and Applied Economics Association.

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