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Risk Efficiency and Cost Effects of Geographic Diversification

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  • Gilbert V. Nartea
  • Peter J. Barry

Abstract

This study uses survey data and deterministic simulation to analyze the effects of geographic diversification in central Illinois on the variance of farm rates of return, and on transportation, monitoring, and other operating costs. Results indicate that risk reduction from geographic dispersion in Illinois is relatively small, and is more than offset by increased operating costs. Rather, demand for land for expansion is the major motivation for observed levels of geographic dispersion of farm units.

Suggested Citation

  • Gilbert V. Nartea & Peter J. Barry, 1994. "Risk Efficiency and Cost Effects of Geographic Diversification," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 16(3), pages 341-351.
    • Handle: RePEc:oup:revage:v:16:y:1994:i:3:p:341-351.
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    File URL: http://hdl.handle.net/10.2307/1349694
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    Cited by:

    1. Larsen, Ryan A. & Mjelde, James W. & Klinefelter, Danny A. & Wolfley, Jared L., 2009. "Geographical Diversification in Agriculture: An Applied Case to Western U.S. Wheat Growers," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46819, Southern Agricultural Economics Association.
    2. Ani L. Katchova, 2005. "The Farm Diversification Discount," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 984-994.
    3. Peterson, Hikaru Hanawa & Schurle, Bryan W. & Langemeier, Michael R., 2005. "Three-Dimensional Efficient Portfolio Frontier: Mean, Variance, and Farm Size," 2005 Annual meeting, July 24-27, Providence, RI 19298, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Larsen, Ryan A. & Vedenov, Dmitry V. & Leatham, David J., 2009. "Enterprise-level risk assessment of geographically diversified commercial farms: a copula approach," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46763, Southern Agricultural Economics Association.
    5. MacNicol, R. & Ortmann, Gerald F. & Ferrer, Stuart R.D., 2008. "Management decisions on commercial sugarcane farms in KwaZulu-Natal: a focus on choice bracketing behaviour for risk management," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), pages 1-24, March.
    6. Tadesse, Dawit & Blank, Steven C., 2003. "Cultivar Diversity: A Neglected Risk Management Strategy," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(2), pages 1-16, August.
    7. Larsen, Ryan A. & Leatham, David J. & Mjelde, James W. & Wolfley, Jared L., 2008. "Geographical Diversification: An Application of Copula Based CVaR," 2008 Agricultural and Rural Finance Markets in Transition, September 25-26, 2008, Kansas City, Missouri 119533, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    8. Marius Rădulescu & Constanta Rădulescu & Gheorghiţă Zbăganu, 2014. "A portfolio theory approach to crop planning under environmental constraints," Annals of Operations Research, Springer, vol. 219(1), pages 243-264, August.

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