Agricultural Economics Department


Date of this Version



Jansen, J. A. (2012). Risk Management Strategies for Nebraska Grain and Oilseed Producers: A Stochastic Simulation and Analysis. Master's thesis. University of Nebraska. Lincoln, NE.


A THESIS, Presented to the Faculty of The Graduate College at the University of Nebraska, In Partial Fulfillment of Requirements For the Degree of Master of Science, Major: Agricultural Economics, Under the Supervision of Professor Bradley D. Lubben. Lincoln, Nebraska: August, 2012

Copyright 2012 Jim A. Jansen


Uncertainty in revenue for grain and oilseed operations located across Nebraska exists due to commodity price volatility and yield variability. Several risk management tools enable producers to deal with financial losses from revenue declines including crop insurance, marketing strategies, and government farm programs. Producers may need to combine multiple tools for an effective risk management strategy, but research lacks on integrating these tools currently available to producers across the state. Actions amongst individuals actively engaged in the industry show their plans to deal with revenue declines may lead to less than optimal strategies.

Stochastic simulation utilizing eight representative farms across Nebraska allows for the analysis of risk management strategies. Attributes of these farms reflect the average size, productivity, and variability, expressed by operations across the eight National Agricultural Statistical Districts of the state. Also, the simulation of national, state, district, and county yields or prices are generated for the necessary parameters in the evaluation of various programs or products.

Conclusion drawn from these simulations indicate the optimal risk management strategy for a region of Nebraska, given a set of feasible prices and base 2011 yield and price parameters. Current program participation and product utilization rates indicate strategies employed by the majority of producers in the state do not sway far from these simulated outcomes. Participating in higher levels of revenue protection crop insurance, direct and counter-cyclical government programs, and using a short futures hedge when marketing grain provided the greatest level of revenue protection subject to a producer’s risk preference. Findings may change substantially dependent upon different price, yield, or guarantee levels.

Advisor: Bradley D. Lubben