Weather Related Risk and Crop Choice in Alberta, Canada

The growth of crops in Alberta is highly sensitive to weather factors. In order to capture profitable returns on average, Alberta farmers have adopted early maturing cereal varieties and oilseeds. Nevertheless considerable risk is involved in crop choice and management practices. The purpose of this paper is to analyze the crop choice decision made by farmers in southern Alberta and the effect of weather-induced risk as well as risk arising from price variability. A crop growth simulation model (Erosion Productivity Impact Calculator) was used to simulate the growth of all major crops grown in sourthern Alberta, under six different seed/harvest combinations, and covering 30 years of weather data. Given EPIC’s strength for simulating drought years, it was coupled with a farm-level Target MOTAD model which assesses bottom-side risk. Some observations from the analysis on the brown soil zone in southern Alberta were: farmers in general appear to exhibit risk aversion; risk aversion to yield variability appears to be significant in the brown soil zone; price variability appears to be relatively less important than yield variability; and forage crops are a tool for reducing income variability induced by price variability.