@article{Rosa:173126,
      recid = {173126},
      author = {Rosa, Franco},
      title = {Evaluation of risk in farm planning: a case study},
      address = {2014},
      number = {1053-2016-85964},
      pages = {16},
      year = {2014},
      abstract = {Many studies suggest that farmers frequently show risk  averse attitudes, and choose the “riskminimizing” and  “safety first” survival strategy rather than pursuing the  profit maximization. This article reports on a study of the  impact of risk caused by different events: climate, stock  levels,
price volatility and other causes affecting the  yield and price variability of agricultural crops. This  study will simulate the risk in farm decisions using a  sumex utility function that allows to parameterize the risk  for specific traits of the function, and MOTAD  (minimization of total absolute deviations) to simulate an  efficient combination of crops in the whole farm planning  (WFP). The empirical analysis is represented by a case  study consisting in the risk simulation of a farm of 100  Ha, growing vegetable crops located in the Northern region  of Italy. The risk is modelled using 15 years historical  observations with discrete probability distribution of some  of the most diffused
cereal and oilseed crops (source:  Eurostat). The objective is to evaluate the risk aversion  by designing a utility frontier of crop combinations using  a LP approximation model. The results indicate the trade  off between expected returns and risk: if the value of  gross income is expected to
increase, the farmers tend to  specialize in the most profitable portfolio enterprise  while it is not so evident that the diversification will  contribute to curb the risk.},
      url = {http://ageconsearch.umn.edu/record/173126},
      doi = {https://doi.org/10.22004/ag.econ.173126},
}