California Institute for the Study of Specialty Crops Report, July 1, 2005, pages 1-19.
Copyright © 2005 by Ronald Fumasi, Wayne Howard and Jay Noel.
While government safety-net programs are used to mitigate the price risk for commodity producers, limited programs exist for specialty crop producers. Specialty crop producers utilize forward contracts to reduce downside price risk. In order to estimate the method of price-risk management, if any, that is preferable to selling at market determined prices, a stochastic simulation model was constructed. The completed simulation model was used to estimate probability distributions for Salinas Valley net income under different pricing scenarios. Probabilities of reaching various net income thresholds were compared. Results indicate that Salinas Valley lettuce producers should maximize profitability by using forward contracts.
Agribusiness | Agricultural and Resource Economics | Business