OPTIMAL POST-HARVEST GRAINS STORAGE BY RISK AVERSE FARMERS
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).
Year of publication: |
2001
|
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Authors: | Lai, Jing-Yi ; Myers, Robert J. ; Hanson, Steven D. |
Institutions: | Department of Agricultural, Food and Resource Economics, Michigan State University |
Keywords: | Crop Production/Industries |
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