Rationalizing apple growers’ decision making in Germany – a utility based whole farm programming approach

Commercial apple production is exposed to various sources of risks. This paper presents a normative utilityefficient programming (UEP) approach, calculating optimal farm plans for apple growers in two different regions of Germany. It takes weather-related quality and yield risks, as well as price ri...

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Published in:The international food and agribusiness management review 2018-09, Vol.21 (8), p.1099-1120
Main Authors: Rohrig, Maren B.K, Hardeweg, Bernd, Lentz, Wolfgang
Format: Article
Language:English
Subjects:
certainty equivalent
crop insurance
Crop Production/Industries
risk aversion
risk management
utility-efficient programming
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Hardeweg, Bernd
Lentz, Wolfgang
description Commercial apple production is exposed to various sources of risks. This paper presents a normative utilityefficient programming (UEP) approach, calculating optimal farm plans for apple growers in two different regions of Germany. It takes weather-related quality and yield risks, as well as price risks into account. It is based on risk attitude and risk perception collected from a sample of 134 apple growers. After combining subjective estimates of the apple growers with relevant historical data, input data for the UEP-model were derived from Monte-Carlo simulations. The UEP-model determines optimal portfolios, consisting of combinations of apple varieties and risk management instruments. The results indicate that the degrees of risk aversion affect optimum farming strategies only to a minor extent. They also provide evidence that farmers would benefit from a combined frost-hail insurance, whereas the absence of frost irrigation systems may cause high yield-losses in the northern part of Germany.
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subjects certainty equivalent
crop insurance
Crop Production/Industries
risk aversion
risk management
utility-efficient programming
title Rationalizing apple growers’ decision making in Germany – a utility based whole farm programming approach
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