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Optimal Post-Harvest Grains Storage By Risk Averse Farmers

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Listed:
  • Lai, Jing-Yi
  • Myers, Robert J.
  • Hanson, Steven D.

Abstract

Most previous research on post-harvest grain storage by farmers has assumed risk-neutral behavior and/or made restrictive assumptions about underlying price probability distributions. In this study we solve the optimal post-harvest storage problem for a risk averse farmer under more general assumptions about underlying price distributions. The resulting model is applied to Michigan corn farmers and results show that, contrary to the sell all-or-nothing risk-neutral rule, risk averse farmers will spread sales out over the storage season. The optimal pattern for sales by Michigan corn farmers is to sell approximately 50% of corn at harvest in November (a risk-reduction strategy) and approximately 40% in May (a return-enhancing strategy).

Suggested Citation

  • Lai, Jing-Yi & Myers, Robert J. & Hanson, Steven D., 2001. "Optimal Post-Harvest Grains Storage By Risk Averse Farmers," Staff Paper Series 11739, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    • Handle: RePEc:ags:midasp:11739
    DOI: 10.22004/ag.econ.11739
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    References listed on IDEAS

    as
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