RISK MANAGEMENT THROUGH ALTERNATIVE PRODUCTION PRACTICES AND MANAGEMENT STRATEGIES: DISCUSSION

Farm Management, Risk and Uncertainty,

Cotton Futures Dynamics: Structural Change, Index Traders and the Returns to Storage

The commodity bull cycle of 2006-2008 and subsequent dramatic price decline have been a source of hardship for traditional commodity market participants such as producers and merchant/shippers. The usefulness of futures markets has been called into question, especially given that some market movements did not appear to be justified by economic fundamentals. An emerging research literature examines the possible influence of futures traders, and particularly the non-traditional Index Traders, on the well-functioning of futures markets and underlying commodity markets. Cotton is a relatively under-studied commodity that is of particular importance for producers in the South and Southwest. To this end, this paper asks the following questions: (1) What role have (primarily long-only) Index Traders played, if we simultaneously account for important ongoing changes in cotton economic fundamentals? (2) Have seasonal and long-run patterns of convenience yield and price volatility changed during or since the commodity bull cycle? (3) How well do the data support a theory of storage model using the concept of convenience yield, and has the relationship changed with the commodity bull cycle? The results presented in this paper suggest that traditional, well-established economic relationships for cotton futures markets clearly have been disrupted during the period 2006- 2009. However, we find no direct evidence to support the claim that Index Traders are responsible for changes in prices or volatility.Cotton, futures markets, theory of storage, convenience yield, Index Traders, Agribusiness, Agricultural Finance, Crop Production/Industries, Demand and Price Analysis, Farm Management, Financial Economics, Marketing, Research Methods/ Statistical Methods, Risk and Uncertainty,

IMPACT OF NEW FARM BILL PROVISIONS ON OPTIMAL RESOURCE ALLOCATION ON HIGHLY ERODIBLE SOILS

The study focuses on incentives to produce crops under reduced tillage systems on highly erodible soils. A mixed integer, mathematical programming model was developed to identify optimal resource use under alternative farm program provisions. A positive counter cyclical payment only reinforces the incentive to comply with NRCS soil erosion constrains.Crop Production/Industries,

Simulation of Alternative Marketing Strategies for U.S. Cotton

Three marketing strategies (selling a put option, cash sale at harvest, and cash sale in June) are simulated based on historical values and ranked based on certainty equivalents for a representative irrigated and dryland cotton farm Scenario analysis is also used to compare varying yield values.Simulation, Marketing, Cotton, Risk, Marketing, Research Methods/ Statistical Methods,

The WTO Cotton Case and US Domestic Policy

Crop Production/Industries, International Relations/Trade,

Mitigating Cotton Revenue Risk Through Irrigation, Insurance, and Hedging

This study focuses on managing cotton production and marketing risks using combinations of irrigation levels, put options (as price insurance), and crop insurance. Stochastic cotton yields and prices are used to simulate a whole-farm financial statement for a 1,000 acre furrow irrigated cotton farm in the Texas Lower Rio Grande Valley under 16 combinations of risk management strategies. Analyses for risk-averse decision makers indicate that multiple irrigations are preferred. The benefits to purchasing put options increase with yields, as they are more beneficial when higher yields are expected from applying more irrigation applications. Crop insurance is strongly preferred at lower irrigation levels.cotton, crop insurance, irrigation, options, puts, risk, simulation, stochastic efficiency with respect to a function, Farm Management, Risk and Uncertainty, D81, Q12, Q15,

Economic Impact of Withdrawing Specific Agricultural Pesticides in the Lower Rio Grande Valley

The Air, Pesticides, and Toxics Division of the Environmental Protection Agency (EPA) has encouraged all states to develop a plan to manage the use of pesticides to prevent application that would result in unreasonable risks to human health and the environment from contamination of ground water. In February, 1988, EPA proposed a strategy where by they would regulate certain pesticides by prohibiting their use in areas vulnerable to leaching unless a state develops and implements a management plan acceptable to EPA. However, banning the use of a pesticide in a region is the worst case scenario available to the TWC for managing water quality. The Texas Water Commission (TWC) assessed the State for areas vulnerable to leaching and found the Lower Rio Grande Valley (LRGV) to be a highly vulnerable area. This study examines three pesticides (atrazine, dicrotophos, and aldicarb) currently used in the LRGV that were identified by the TWC as potential contaminants of ground water. Alternative methods of controlling pests in this region were identified, and the economic impacts of withdrawing one or all three of these pesticides from the study area were estimated. Regional impacts on gross receipts (sales), variable costs, and net returns were determined. If atrazine use were banned in the LRGV, corn and sorghum sales would decrease by approximately $1 million, variable costs to produce corn, sorghum, and sugarcane would increase by almost$2 million dollars, leaving farmers in the region with a $3 million dollar 1088 in net income per year. If dicrotophos use were prohibited in the LRGV, variable cost to produce cotton would increase by over$600,000 for the region as a whole. Banning aldicarb use in the study area would reduce citrus sales by almost $3 million, increase variable costs to produce citrus by over$200,000, and reduce farmer net income by over $3 million annually

Economic and Conservation Evaluation of Capital Renovation Projects: Hidalgo County Irrigation District No. 1 (Edinburg) - North Branch / East Main - Final

Initial construction costs and net annual changes in operating and maintenance expenses are identified for a single-component capital renovation project proposed by Hidalgo County Irrigation District No. 1 to the Bureau of Reclamation and North American Development Bank. The proposed project involves installing 4.83 miles of multi-size pipeline to replace a segment of the North Branch / East Main canal. Both nominal and real estimates of water and energy savings and expected economic and financial costs of those savings are identified throughout the anticipated 48-year useful life for the proposed project. Sensitivity results for both the cost of water savings and cost of energy savings are presented for several important parameters. Annual water and energy savings forthcoming from the total project are estimated, using amortization procedures, to be 5,838 ac-ft of water per year and 3,293,049,926 BTUs (965,138 kwh) of energy per year. The calculated economic and financial cost of water savings is estimated to be $15.58 per ac-ft. The calculated economic and financial cost of energy savings is estimated at$0.0000392 per BTU ($0.134 per kwh). In addition, expected real (rather than nominal) values are indicated for the Bureau of Reclamation’s three principal evaluation measures specified in the United States Public Law 106-576 legislation. The initial construction cost per ac-ft of water savings measure is$30.68 per ac-ft of water savings. The initial construction cost per BTU (kwh) of energy savings measure is $0.0000544 per BTU ($0.186 per kwh). The ratio of initial construction costs per dollar of total annual economic savings is estimated to be -1.58

Economic Methodology for South Texas Irrigation Projects - RGIDECON

A mathematical discourse is provided, documenting the economic and financial methods used in RGIDECON, an Excel spreadsheet capital investment evaluation model focused on irrigation district-level pumping and delivery systems. These methods and the spreadsheet are the basis to ascertaining several measures of performance for the capital improvement investments proposed by irrigation districts relying on the Rio Grande River for their supplies of agricultural irrigation, municipal and industrial water. Both the approach developed by Texas Agricultural Experiment Station and Texas Cooperative Extension agricultural economists and the procedures used to calculate the required indicators mandated in Public Law 106-576 are presented. Attention is also directed to the process of selecting the discount rate to be used in the analyses for individual irrigation districts' proposed projects

Economic Impact of Withdrawing Specific Agricultural Pesticides in the Lower Rio Grande Valley

The Air, Pesticides, and Toxics Division of the Environmental Protection Agency (EPA) has encouraged all states to develop a plan to manage the use of pesticides to prevent application that would result in unreasonable risks to human health and the environment from contamination of ground water. In February, 1988, EPA proposed a strategy where by they would regulate certain pesticides by prohibiting their use in areas vulnerable to leaching unless a state develops and implements a management plan acceptable to EPA. However, banning the use of a pesticide in a region is the worst case scenario available to the TWC for managing water quality. The Texas Water Commission (TWC) assessed the State for areas vulnerable to leaching and found the Lower Rio Grande Valley (LRGV) to be a highly vulnerable area. This study examines three pesticides (atrazine, dicrotophos, and aldicarb) currently used in the LRGV that were identified by the TWC as potential contaminants of ground water. Alternative methods of controlling pests in this region were identified, and the economic impacts of withdrawing one or all three of these pesticides from the study area were estimated. Regional impacts on gross receipts (sales), variable costs, and net returns were determined. If atrazine use were banned in the LRGV, corn and sorghum sales would decrease by approximately $1 million, variable costs to produce corn, sorghum, and sugarcane would increase by almost$2 million dollars, leaving farmers in the region with a $3 million dollar 1088 in net income per year. If dicrotophos use were prohibited in the LRGV, variable cost to produce cotton would increase by over$600,000 for the region as a whole. Banning aldicarb use in the study area would reduce citrus sales by almost $3 million, increase variable costs to produce citrus by over$200,000, and reduce farmer net income by over $3 million annually