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Effects of Federal Risk Management Programs on Optimal Acreage Allocation and Nitrogen Use in a Texas Cotton–Sorghum System

Published online by Cambridge University Press:  28 April 2015

Sangtaek Seo ,
Paul D. Mitchell  and
David J. Leatham
Sangtaek Seo
Affiliation:
Department of Agricultural and Applied Economics, Texas Tech University, Lubbock, TX
Paul D. Mitchell
Affiliation:
Department of Agricultural and Applied Economics, University of Wisconsin–Madison, Madison, WI
David J. Leatham
Affiliation:
Department of Agricultural Economics, Texas A&M University, College Station, TX
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Abstract

We analyze the effects of crop insurance and the Marketing Loan Program on optimal nitrogen use and acreage allocation for a case cotton–sorghum farm in Texas. A mathematical programming model is used to solve for the optimal nitrogen fertilizer rate, crop acreage allocation, coverage level, and price election factor, along with participation in the crop insurance and the Marketing Loan Program for both crops. Results show that depending on the crop and farmer risk aversion, these federal risk management programs increase or decrease optimal fertilizer rates –6% to 3%, increase optimal cotton acreage 94% to 144%, and decrease sorghum acres up to 50%.

Keywords

crop insuranceextensive marginintensive marginloan deficiency paymentsrevenue insuranceQ12Q18
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 37 , Issue 3 , December 2005 , pp. 685 - 699
Copyright
Copyright © Southern Agricultural Economics Association 2005

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