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Transition to Organic Cropping Systems under Risk

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  • Archer, David W.
  • Kludze, Hillarius

Abstract

We analyze the risks, returns and optimal adoption strategies for a representative Minnesota farm switching from conventional to organic cropping systems. The EPIC simulation model was calibrated based on the yields observed in a farming systems field study. A farm-level simulation model was constructed using the EPIC simulated crop yields and historical prices. Results were compared for an expected utility maximizing farm under a range of risk aversion levels, with and without management learning curves and biological transition effects. A dynamic programming model was then constructed to evaluate the joint effects of machinery replacement decisions, learning curves, and biological transition effects on optimal adoption strategies. Results show that producers will find it optimal to transition to organic systems as rapidly as possible, even with significant learning curves and machinery adjustment costs.

Suggested Citation

  • Archer, David W. & Kludze, Hillarius, 2006. "Transition to Organic Cropping Systems under Risk," 2006 Annual meeting, July 23-26, Long Beach, CA 21278, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea06:21278
    DOI: 10.22004/ag.econ.21278
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    References listed on IDEAS

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    1. J. Brian Hardaker & James W. Richardson & Gudbrand Lien & Keith D. Schumann, 2004. "Stochastic efficiency analysis with risk aversion bounds: a simplified approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 253-270, June.
    2. repec:ags:joaaec:v:32:y:2000:i:2:p:299-315 is not listed on IDEAS
    3. Richardson, James W. & Klose, Steven L. & Gray, Allan W., 2000. "An Applied Procedure For Estimating And Simulating Multivariate Empirical (Mve) Probability Distributions In Farm-Level Risk Assessment And Policy Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(2), pages 1-17, August.
    4. Streff, Nicholas & Dobbs, Thomas L., 2004. "'Organic' and 'Conventional' Grain and Soybean Prices in the Northern Great Plains and Upper Midwest: 1995 through 2003," Research Reports 200401, South Dakota State University, Department of Economics.
    5. Streff, Nicholas J. & Dobbs, Thomas L., 2004. "'Organic' And 'Conventional' Grain And Soybean Prices In The Northern Great Plains And Upper Midwest: 1995 Through 2003," Econ Pamphlets 32035, South Dakota State University, Department of Economics.
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    Cited by:

    1. Curtis, Kynda R. & Bishop, Carol & Harris, Thomas R., 2009. "Economics of Alternative Crop Production in Arid Regions," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48053, Australian Agricultural and Resource Economics Society.
    2. Cox, W., 2018. "Agronomic and Economic Performance of Maize, Soybean, and Wheat in Different Rotations during the Transition to an Organic Cropping System," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276954, International Association of Agricultural Economists.
    3. Cox, William & Hanchar, John, 2016. "Agronomic and Economic Performance of Soybean as an Entry Crop to an Organic Cropping System following Conventional Corn, Spring Barley, or Soybean," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235318, Agricultural and Applied Economics Association.
    4. Nicolai V. Kuminoff & Ada Wossink, 2010. "Why Isn’t More US Farmland Organic?," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 240-258, June.

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    Keywords

    Risk and Uncertainty;

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