Using portfolio theory to enhance wheat yield stability in low-income nations: An application in the Yaqui Valley of northwestern Mexico

This study applies portfolio theory to wheat varietal selection decisions in order to find risk-minimizing outcomes while holding historical yields constant. Potential correlation across wheat cultivar yields increases the complexity of cultivar selection decisions, with gains in one attribute (yiel...

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Bibliographic Details
Published in:Journal of agricultural and resource economics 2010-08, Vol.35 (2), p.334-347
Main Authors: Nalley, L. Lanier, Barkley, Andrew P
Format: Article
Language:English
Subjects:
Agricultural production
case studies
Crop economics
crop production
crop yield
Crops
Cultivars
Developing countries
Disease resistance
Diversification
Economic theory
equations
Expected utility
farm income
Financial portfolios
Food prices
Food security
high-yielding varieties
Investment risk
LDCs
Low income groups
low income households
market prices
market stabilization
mathematical models
optimal variety selection
portfolio analysis
Portfolio diversification
Price stabilization
Rain
selection criteria
Statistical variance
Triticum aestivum
Wheat
Yield
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Summary:This study applies portfolio theory to wheat varietal selection decisions in order to find risk-minimizing outcomes while holding historical yields constant. Potential correlation across wheat cultivar yields increases the complexity of cultivar selection decisions, with gains in one attribute (yield potential) often associated with losses in another (yield stability). Using location-specific empirical data, portfolio theory can provide producers in low-income countries a tool for developing a recommended portfolio of varieties given a desired risk-aversion level. Based on data from Mexico's Yaqui Valley, results suggest that sowing a portfolio of wheat varieties could have lowered yield variance by 22% to 33% in Northwest Mexico.
ISSN:1068-5502
2327-8285
DOI:10.22004/ag.econ.93223