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

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  • 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
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    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.
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