A Comparison of Risk and Return Characteristics of Efficient Crop Portfolios for the Brown Soil Zones Saskatchewan and Mecklenburg, Germany

Two efficient farms are constructed for the brown soils of Saskatchewan, Canada and for Mecklenburg, Germany based on producer panels. Both farms feature highly integrated cropping systems which take advantage of cropping synergies. However, farm risk is inherently different between the two because differences in 1) climate that gives rise to very different yield risk and cost structure, and 2) EU programs which offer fixed cash payments and stable sugar beet prices. As expected, risk is much higher for the Saskatchewan case farm - it has a chance of a negative cash flow of approximately one year in five. In sharp contrast, the Mecklenburg has very little chance of generating a negative cash flow. Hence, it is easy to understand why crop insurance and other risk reducing types of programs have long been popular in Saskatchewan grain and oilseed price and yield risk make for a very real possibility of cash shortfalls on even the most efficient farm with moderate debt. On the other hand, there is little need for such risk reducing programs by efficient German farms because risk remains relatively low unless he/she is financially imprudent. Moving to higher farmland rents associated with an equilibrated land market or removing government payments increases risk considerably, but still at levels well below those of the Saskatchewan case farm.risk and return, EV model, Saskatchewan and German grain farms, Crop Production/Industries,

AN ANALYSIS OF THE YIELD-PRICE RISK ASSOCIATED WITH SPECIALTY CROPS

Specialty crops have been cited as means to diversify crop portfolios on the prairies. Lentils, a specialty crop, have high variability in yields and prices but are relatively uncorrelated with the yields and prices of other traditional Saskatchewan crops. In addition, yields and prices of lentils may be negatively correlated. These attributes have important but offsetting effects in crop portfolio selection. The objective of this article is to assess the relative profitability and riskiness of wheat and lentil rotations for a representative Saskatchewan farm and to select appropriate farmers who should consider production of lentils. The cumulative density function of net returns are simulated for both rotations assuming stochastic prices and yields. Stochastic dominance with respect to a function is used to identify the corresponding appropriate profile of agricultural producers for each crop rotation. The results indicate that lentils should be considered by a number of, but not all, Saskatchewan farmers.Crop Production/Industries, Risk and Uncertainty,

AN ALTERNATIVE APPROACH TO THE EVALUATION OF GOAL HIERARCHIES AMONG FARMERS

Results of a study of goal orderings of Saskatchewan farmers who participate in the province's FARMLAB Program are presented. We use the method of fuzzy pair-wise comparisons which allows the respondent to indicate a degree of preference between two alternative goal statements, thereby providing more information than in the binary case. From survey data ratio-scale scores are constructed for eight goal statements, and these are regressed on a set of farm enterprise and household characteristics and a psychological locus-of-control (or I-E) score. The empirical results indicate that goodness-of-fit measures are better than those obtained by other researchers, perhaps because a psychological measure (I-E score) is included as an explanatory variable for goal orderings.Farm Management,

THE IMPACT OF CAPITAL GAINS TAX TREATMENTS ON OPTIMAL LIVESTOCK ENTERPRISE SELECTION

Livestock Production/Industries,

A Comparison of Risk and Return Characteristics of Efficient Crop Portfolios for the Brown Soil Zones Saskatchewan and Mecklenburg, Germany

Two efficient farms are constructed for the brown soils of Saskatchewan, Canada and for Mecklenburg, Germany based on producer panels. Both farms feature highly integrated cropping systems which take advantage of cropping synergies. However, farm risk is inherently different between the two because differences in 1) climate that gives rise to very different yield risk and cost structure, and 2) EU programs which offer fixed cash payments and stable sugar beet prices. As expected, risk is much higher for the Saskatchewan case farm - it has a chance of a negative cash flow of approximately one year in five. In sharp contrast, the Mecklenburg has very little chance of generating a negative cash flow. Hence, it is easy to understand why crop insurance and other risk reducing types of programs have long been popular in Saskatchewan grain and oilseed price and yield risk make for a very real possibility of cash shortfalls on even the most efficient farm with moderate debt. On the other hand, there is little need for such risk reducing programs by efficient German farms because risk remains relatively low unless he/she is financially imprudent. Moving to higher farmland rents associated with an equilibrated land market or removing government payments increases risk considerably, but still at levels well below those of the Saskatchewan case farm

AN ANALYSIS OF THE YIELD-PRICE RISK ASSOCIATED WITH SPECIALTY CROPS

Specialty crops have been cited as means to diversify crop portfolios on the prairies. Lentils, a specialty crop, have high variability in yields and prices but are relatively uncorrelated with the yields and prices of other traditional Saskatchewan crops. In addition, yields and prices of lentils may be negatively correlated. These attributes have important but offsetting effects in crop portfolio selection. The objective of this article is to assess the relative profitability and riskiness of wheat and lentil rotations for a representative Saskatchewan farm and to select appropriate farmers who should consider production of lentils. The cumulative density function of net returns are simulated for both rotations assuming stochastic prices and yields. Stochastic dominance with respect to a function is used to identify the corresponding appropriate profile of agricultural producers for each crop rotation. The results indicate that lentils should be considered by a number of, but not all, Saskatchewan farmers

USE OF COMPUTER GRAPHICS IN THE DEVELOPMENT AND EVALUATION OF PRODUCTION RESPONSE SURFACES

Various statistical measures and prior knowledge of functional relationships have traditionally been the main guides in developing production response equations. Computer graphics provide a valuable addition to this developmental process. Through graphics, the characteristics of a large volume of data can be visually analyzed. In addition, the physical characteristics of alternative functional forms can more easily be compared to the original data. Computer graphics were used to analyze raw data through surface and contour plots, and to compare three alternative functional forms chosen to represent the data. The example cited demonstrated the potential advantage of using computer graphics as a visual research tool in production studies

AN ALTERNATIVE APPROACH TO THE EVALUATION OF GOAL HIERARCHIES AMONG FARMERS

Results of a study of goal orderings of Saskatchewan farmers who participate in the province's FARMLAB Program are presented. We use the method of fuzzy pair-wise comparisons which allows the respondent to indicate a degree of preference between two alternative goal statements, thereby providing more information than in the binary case. From survey data ratio-scale scores are constructed for eight goal statements, and these are regressed on a set of farm enterprise and household characteristics and a psychological locus-of-control (or I-E) score. The empirical results indicate that goodness-of-fit measures are better than those obtained by other researchers, perhaps because a psychological measure (I-E score) is included as an explanatory variable for goal orderings