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PRODUCER MARKETING UNDER UNCERTAINTY: IDENTIFICATION OF RISK-EFFICIENT SOYBEAN MARKETING ALTERNATIVES (RISK-MANAGEMENT, AGRICULTURAL, MARKETING, RISK-MODELING)
Abstract
Soybean prices have fluctuated dramatically since 1972. Old marketing methods followed by producers were often found to yield inconsistent and inferior results during this period. The primary focus for this research was to examine a set marketing strategies (including cash sales, static hedges, and selective hedges) available to producers over the years 1972 to 1983 and identify dominant (high return) portfolios of strategies at various levels of riskiness. Two definitions of risk were operationalized in the portfolio selection process. Risk was first defined as a variation of actual income from expected returns. MOTAD (minimization of total absolute deviations), a linear programming technique was used to select optimal soybean marketing strategy mixes for a given amount of absolute income deviations. Subsequently, risk was redefined as the occurrence of actual returns falling below a targeted return level. Target MOTAD was employed to identify dominant strategy mixes which maximized income subject to this risk restriction. Diversification of marketing methods was found to be preferred. All dominant portfolios contained selective hedging strategies as a portion of the preferred mix, indicating substantial returns to active marketing. Preharvest pricing, though restricted, was found to benefit the producer. Two limitations to this process were noted. The projection of these results across regions or over time implies that the characteristics of the new situation are similar to those contained in this analysis. Second, the introduction of new marketing techniques (such as commodity options) may alter these results.
Subject Area
Agricultural economics
Recommended Citation
CURTIS, CHARLES EDWARD, "PRODUCER MARKETING UNDER UNCERTAINTY: IDENTIFICATION OF RISK-EFFICIENT SOYBEAN MARKETING ALTERNATIVES (RISK-MANAGEMENT, AGRICULTURAL, MARKETING, RISK-MODELING)" (1985). ETD collection for University of Nebraska-Lincoln. AAI8606959.
https://digitalcommons.unl.edu/dissertations/AAI8606959