Crop Rotations and Risk Management in Mississippi Delta Agriculture

• Agricultural Economics Workshop

Date and Location

Thursday, November 5, 2020, 4:00 PM - 5:00 PM

Abstract

*Our workshop will join the seminar of the Agricultural & Natural Resource Seminar at ARE, UC Berkeley.

Abstract: Crop rotations have important agronomic effects on both the mean and variance of expected crop yields. An effective crop rotation scheme can reduce year-to-year pest pressure, replenish soil nutrients, and increase plant vitality. However, choosing crop rotations to maximize agronomic benefits may not maximize economic benefits. Additionally, farmers often diversify their crop mix to manage both yield risk and price risk. In this research, we explore how crop rotations and cropping history affect farmers’ risk management decisions. Specifically, we ask: how does knowledge of a field’s crop history alter a farmer’s optimal cropping portfolio with respect to managing risk? To answer this question, we combine experimental data from university test plots with modern portfolio theory to generate efficient frontiers of crop choice under different hypothetical cropping histories. Our results quantify the risk-reward trade-off that farmers face and highlight the importance of dynamic rotation effects in the crop choice decision.