OBTAINING LOWER AND UPPER BOUNDS ON THE VALUE OF SEASONAL CLIMATE FORECASTS AS A FUNCTION OF RISK PREFERENCES

A methodological approach to obtain bounds on the value of information based on an inexact representation of the decision makerÂ’s utility function is presented. Stochastic dominance procedures are used to derive the bounds. These bounds provide more information than the single point estimates associated with traditional decision analysis approach to valuing information, in that classes of utility functions can be considered instead of one specific utility function. Empirical results for valuing seasonal climate forecasts illustrate that the type of management strategy given by the decision makerÂ’s prior knowledge interacts with the decision makerÂ’s risk preferences to determine the bounds.Risk and Uncertainty,

CHALLENGES AND OPPORTUNITIES PROVIDED BY SEASONAL CLIMATE FORECASTS: A LITERATURE REVIEW

Use of seasonal climate forecasts is a rapidly evolving area. Effective research and application of climate forecasts require close cooperation between scientists in diverse disciplines and decision makers. Successful collaboration requires all players to at least partially understand each other's perspectives. Issues associated with seasonal forecasts, through a selected review of both physical and social sciences literature, is presented. Our hope is that the review will improve research in this area by stimulating further collaborations.climate forecasts, review, value of information, Resource /Energy Economics and Policy, D80, D81, O30, Q00,

BIOPHYSICAL SIMULATION IN SUPPORT OF CROP PRODUCTION DECISIONS: A CASE STUDY IN THE BLACKLANDS REGION OF TEXAS

Economic feasibility of Texas Blacklands corn production in relation to sorghum, wheat, and cotton is studied. Biophysical simulation generated yield data are integrated with an economic decision model using quadratic programming. Given the various scenarios analyzed, corn is economically feasible for the Blacklands. A crop mix of half corn and half cotton production is selected under risk neutrality with wheat entering if risk aversion is present. Corn and grain sorghum production are highly substitutable. Profit effects attributed to changing corn planting dates are more pronounced than profit changes resulting from altering corn population or maturity class.Crop Production/Industries,

ESTIMATING THE VALUE OF SEQUENTIAL UPDATING SOLUTIONS FOR INTRAYEAR CROP MANAGEMENT

Results of comparing updating versus nonupdating modeling assumptions call into question the use of models based on nonupdating strategies as valid representations of actual farmer actions. If farmers are sequential updaters, the results indicate that models assuming no updating are inaccurate. The degree of this inaccuracy ranges between 4% and 10% of profits for the study area. Further, the results indicate that updating appears to be important for both descriptive and prescriptive studies of farmer behavior.Crop Production/Industries,

EXAMINATION OF ALTERNATIVE HETEROSCEDASTIC ERROR STRUCTURES USING EXPERIMENTAL DATA

Impacts of alternative specifications for heteroscedastic error structures are examined by estimating various production functions for corn in Central Texas. Production- and profit- maximizing levels of input and the shape of the profit equation obtained from models not corrected for heteroscedasticity differed from those obtained from models corroded for heteroscedasticaity. Using the profit-maximizing input levels for each production function gave essentially the same estimated yield and profit, regardless of the specification for heteroscedasticity employed. Differences of up to one-quarter to one-third are noted, however, in the amount of profit-maximizing levels of input used, depending on the heteroscedasticity correction.Corn, Heteroscedasticity, Production function, Research Methods/ Statistical Methods,

REGIONAL COST SHARE NECESSARY FOR RANCHER PARTICIPATION IN BRUSH CONTROL

Large-scale brush-control programs are being proposed in Texas to increase off-site water yields. Biophysical and economic simulation models are combined to estimate the effects of brush control on representative ranches in four ecological regions of the Edwards Plateau area of Texas. Net present values of representative ranches in three of four regions decrease with brush control. Cost shares necessary for ranches from the three regions to break even range from 7% to 31% of total brush-control costs. Any large-scale brush-control program will therefore require a substantial investment by the state of Texas.Agribusiness,

COMBINING ECONOMIC AND BIOLOGICAL DATA TO ESTIMATE THE IMPACT OF POLLUTION ON CROP PRODUCTION

Duality methods utilizing a profit function framework are employed to estimate the output elasticity of ambient ozone levels on cash grain farms in Illinois. While duality methods have been recommended as a cure to many of the statistical problems of direct estimation of production functions, multicollinearity may still be a problem. A method for utilizing stochastic information on parameters of a seemingly unrelated system of equations, which is implied by profit function estimation, is developed and applied to measuring the impact of ozone. Such an approach may be necessary in measuring other environmental effects because of a lack of regressor variability.Crop Production/Industries, Environmental Economics and Policy,

Machinery-Sharing Contractual Issues and Impacts on Cash Flows of Agribusinesses

Contractual arrangements for joint machinery ownership between independent agribusinesses are explored. A two-farm economic simulation model of locations in Texas, Colorado, and Montana is developed to provide insight associated with sharing combines. Important variables include combine size (efficiency), yield losses resulting from untimely access to equipment, the penalty structure for untimely delivery, and cost-sharing and depreciation deductions claimed between producers. Combine sharing is risk-reducing in most cases. The gains to both parties are lowest when harvesting periods overlap. While the value of sharing is positive under many scenarios, benefits from sharing are small relative to total farm revenue.combines, machinery sharing, risk, simulation, Agribusiness, Agricultural Finance,

AN ECONOMIC ANALYSIS OF A CORN-SOYBEAN CROP ROTATION UNDER VARIOUS INPUT COMBINATIONS IN SOUTH CENTRAL TEXAS

Eight input combinations of commercial fertilizer, insecticides, and herbicides on a corn-soybean crop rotation in the Brazos River Bottom of Texas are evaluated. Input combinations which do not fully utilize all three inputs are consistently ranked higher by all criteria as the preferred input strategy for the corn-soybean rotation system. These results, which indicate limited input crop rotations that fall somewhere between the extremes of conventional agricultural production and organic agriculture, deserve further attention as a possible production alternative.corn, limited input, soybean, Crop Production/Industries,

Geographical Diversification: An Application of Copula Based CVaR

Risk and Uncertainty,