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Modelling joint distribution of crop plant yields and prices with use of a copula function

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  • Kobus, Paweł

Abstract

The paper constitutes an attempt at modelling the joint distribution of crop plant yields and prices in Poland. The main objective of the paper was to examine the usefulness of the copula function for the task and the selection of suitable marginal distributions. The fit of a joint distribution based copula function was compared with multivariate normal distribution. It was revealed that the multivariate normal distribution is outperformed by a Gaussian copula with the following marginal distribution: yields of both crop plants – normal distribution, price of wheat – Burr distribution (type XII) and price of rapeseeds – lognormal distribution. The main advantages of the copula function were: the possibility to use different marginal distributions and ability to model non-elliptical two-dimensional distributions. The practical implications of choosing the right joint distribution is demonstrated by comparing empirical quantiles of income for a given crop structure with theoretical quantiles based on the proposed joint distributions.

Suggested Citation

  • Kobus, Paweł, 2013. "Modelling joint distribution of crop plant yields and prices with use of a copula function," Problems of World Agriculture / Problemy Rolnictwa Światowego, Warsaw University of Life Sciences, vol. 13(28), pages 1-10, December.
    • Handle: RePEc:ags:polpwa:190777
    DOI: 10.22004/ag.econ.190777
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    File URL: https://ageconsearch.umn.edu/record/190777/files/2013_4_8.pdf
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    References listed on IDEAS

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    1. Schulte-Geers, Matthias & Berg, Ernst, 2011. "Modelling farm production risk with copulae instead of correlations," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115996, European Association of Agricultural Economists.
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    3. Zhu, Ying & Ghosh, Sujit K. & Goodwin, Barry K., 2008. "Modeling Dependence in the Design of Whole Farm---A Copula-Based Model Approach," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6282, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Tejeda, Hernan A. & Goodwin, Barry K., 2008. "Modeling Crop prices through a Burr distribution and Analysis of Correlation between Crop Prices and Yields using a Copula method," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6061, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Dutang, Christophe & Goulet, Vincent & Pigeon, Mathieu, 2008. "actuar: An R Package for Actuarial Science," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 25(i07).
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