IDEAS home Printed from https://ideas.repec.org/a/cup/jagaec/v23y1991i01p165-179_01.html
   My bibliography  Save this article

The Effects of Firm Size and Production Cost Levels on Dynamically Optimal After-Tax Cotton Storage and Hedging Decisions

Author

Listed:
  • Tronstad, Russell

Abstract

Farm size and production costs are varied in a six state variable stochastic dynamic programming model that quantifies monthly hedging, storage, and cash cotton sale decisions for an Alabama cotton producer. State variables considered are: (1) cash cotton price; (2) basis level; (3) before-tax income level; (4) cotton holdings; (5) futures position; and (6) value of futures position. Results indicate that when farm size and production cost level differ, marketing decisions diverge the most for cash cotton sales at the end of the tax year and lower range of cash price (less than $.65/lb.), basis (less than -$.05/lb.), and before-tax income (less than $0.00) states.

Suggested Citation

  • Tronstad, Russell, 1991. "The Effects of Firm Size and Production Cost Levels on Dynamically Optimal After-Tax Cotton Storage and Hedging Decisions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 23(1), pages 165-179, July.
    • Handle: RePEc:cup:jagaec:v:23:y:1991:i:01:p:165-179_01
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0081305200017945/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Russell Tronstad & C. Robert Taylor, 1991. "Dynamically Optimal After-Tax Grain Storage, Cash Grain Sale, and Hedging Strategies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(1), pages 75-88.
    2. Mossin, Jan, 1969. "A Note on Uncertainty and Preferences in a Temporal Context," American Economic Review, American Economic Association, vol. 59(1), pages 172-174, March.
    3. Larry S. Karp, 1987. "Methods for Selecting the Optimal Dynamic Hedge When Production is Stochastic," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 647-657.
    4. Helmers, Glenn A. & Held, Larry J., 1977. "Comparison Of Livestock Price Forecasting Using Simple Techniques, Forward Pricing And Outlook Information," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 1(1), pages 1-4, June.
    5. Kandice H. Kahl, 1983. "Determination of the Recommended Hedging Ratio," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(3), pages 603-605.
    6. Rulon D. Pope, 1982. "Empirical Estimation and Use of Risk Preferences: An Appraisal of Estimation Methods That Use Actual Economic Decisions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(2), pages 376-383.
    7. McIntosh, Christopher S. & Bessler, David A., 1988. "Forecasting Agricultural Prices Using A Bayesian Composite Approach," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 20(2), pages 1-8, December.
    8. Richard E. Just, 1975. "Risk Aversion under Profit Maximization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(2), pages 347-352.
    9. Kreps, David M & Porteus, Evan L, 1978. "Temporal Resolution of Uncertainty and Dynamic Choice Theory," Econometrica, Econometric Society, vol. 46(1), pages 185-200, January.
    10. Stewart L. Brown, 1985. "A Reformulation of the Portfolio Model of Hedging," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(3), pages 508-512.
    11. Burt, Oscar R., 1982. "Dynamic Programming: Has Its Day Arrived?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-14, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mallory, Mindy L. & Zhao, Wenjiao & Irwin, Scott H., 2012. "Farmer’s Income Shifting Option in Post-harvest Forward Contracting," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124692, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tronstad, Russell, 1989. "Optimal Cash Grain Sale, Storage, and Hedging Decisions for Grain Producers: A Stochastic Dynamic Programming Analysis," 1989 Annual Meeting, July 30-August 2, Baton Rouge, Louisiana 270518, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Blank, Steven C., 1989. "Research On Futures Markets: Issues, Approaches, And Empirical Findings," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-14, July.
    3. Segal, Uzi, 1987. "The Ellsberg Paradox and Risk Aversion: An Anticipated Utility Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 175-202, February.
    4. Knut K. Aase, 2016. "Recursive utility using the stochastic maximum principle," Quantitative Economics, Econometric Society, vol. 7(3), pages 859-887, November.
    5. Mark W. Ditsch & Raymond M. Leuthold, 1996. "Evaluating the Hedging Potential of the Lean Hog Futures Contract," Finance 9609003, University Library of Munich, Germany.
    6. Mohammed Abdellaoui & Enrico Diecidue & Emmanuel Kemel & Ayse Onculer, 2022. "Temporal Risk: Utility vs. Probability Weighting," Management Science, INFORMS, vol. 68(7), pages 5162-5186, July.
    7. Van Kooten, G. C. & Spriggs, John & Schmitz, Andrew, 1989. "The Impact of Canadian Commodity Stabilization Programs on Risk Reduction and the Supply of Agricultural Commodities," Working Papers 244037, Agriculture and Agri-Food Canada.
    8. Knut K. Aase & Petter Bjerksund, 2021. "The Optimal Spending Rate versus the Expected Real Return of a Sovereign Wealth Fund," JRFM, MDPI, vol. 14(9), pages 1-36, September.
    9. Aglasan, Serkan & Wu, Shenan & Goodwin, Barry K., 2021. "Cross-hedging with Agricultural Commodities: A Copula-GARCH Approach," 2021 Annual Meeting, August 1-3, Austin, Texas 313960, Agricultural and Applied Economics Association.
    10. Duncan, Steven Scott, 1988. "The relevant forecast of variance of income for marketing decisions under uncertainty," ISU General Staff Papers 198801010800009839, Iowa State University, Department of Economics.
    11. James Andreoni & Charles Sprenger, 2010. "Risk Preferences Are Not Time Preferences: Discounted Expected Utility with a Disproportionate Preference for Certainty," NBER Working Papers 16348, National Bureau of Economic Research, Inc.
    12. Aase, Knut K., 2014. "Recursive utility and jump-diffusions," Discussion Papers 2014/9, Norwegian School of Economics, Department of Business and Management Science.
    13. Ulrich Schmidt & Horst Zank, 2022. "Chance theory: A separation of riskless and risky utility," Journal of Risk and Uncertainty, Springer, vol. 65(1), pages 1-32, August.
    14. Ditsch, Mark W. & Leuthold, Raymond M., 1996. "Evaluating The Hedging Potential Of The Lean Hog Futures Contract," ACE OFOR Reports 14769, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    15. Tomek, William G. & Peterson, Hikaru Hanawa, 2000. "Risk Management in Agricultural Markets: A Survey," Staff Papers 121140, Cornell University, Department of Applied Economics and Management.
    16. Aase, Knut K., 2014. "The Life Cycle Model with Recursive Utility: New insights on optimal consumption," Discussion Papers 2014/19, Norwegian School of Economics, Department of Business and Management Science, revised 16 Oct 2015.
    17. Lybbert, Travis J. & McPeak, John, 2012. "Risk and intertemporal substitution: Livestock portfolios and off-take among Kenyan pastoralists," Journal of Development Economics, Elsevier, vol. 97(2), pages 415-426.
    18. Houston, Jack E. & Khonde, Mavuangi, 1990. "Opportunities and Pitfalls of International Futures Markets Trading by Developing Countries: The Case of Zaire Coffee Exports," 1990 Annual meeting, August 5-8, Vancouver, Canada 270724, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Aase, Knut K., 2020. "Elements of economics of uncertainty and time with recursive utility," Discussion Papers 2020/13, Norwegian School of Economics, Department of Business and Management Science.
    20. James E. Smith, 1998. "Evaluating Income Streams: A Decision Analysis Approach," Management Science, INFORMS, vol. 44(12-Part-1), pages 1690-1708, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jagaec:v:23:y:1991:i:01:p:165-179_01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/aae .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.