Agricultural Economics Department
First Advisor
Cory Walters
Second Advisor
Kathleen Brooks
Date of this Version
Summer 8-2021
Document Type
Thesis
Citation
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 Professors Cory Walters and Kathleen Brooks
Lincoln, Nebraska, August 2021
Abstract
Each year producers must make risk management decisions early in the growing season when many variables are unknown. In this thesis we create an empirical model utilizing thirty years (1989-2018) of historical yield, cost, and daily price series data, to determine the optimal risk management strategy of crop insurance and an intra-season marketing plan that will both minimize net income risk and maximize average net income. The empirical model is taken a step further to include an out-of-sample year in order to test the robustness of empirical results to financially devastating events that have never been seen. We test the results with two different out-of-sample models utilizing two different yield and price scenarios. From the results, we find that the optimal marketing plan changes based on the location and practice (irrigated vs. non-irrigated) as well as the amount of hedging the producer decides to participate in before harvest. For example, at low levels of hedging greater emphasis is put on the insurance contract selected to affect financial outcomes, while at high levels of hedging, a plan that evenly hedges grain throughout the growing season minimized risk and returned the highest average net income.
Advisors: Cory Walters and Kathleen Brooks
Comments
Copyright © 2021, Kara A. Zimmerman