Evaluating risk management strategies for Pacific Northwest grain producers
Larry D. Makus
H. Holly Wang
A utility maximization model is used to assess alternative risk management portfolios of Pacific Northwest non-irrigated grain producers using three rotational practices. Risk management tools include hedging with wheat futures, yield insurance, two revenue insurance products (with and without price replacement), and government programs under the 2002 Food Security and Rural Investment (FSRI) Act. Government programs account for the primary risk management value of all the analyzed portfolios. The revenue insurance product with price replacement is preferred when available, and yield insurance is preferred over revenue insurance without price replacement. Hedging is not extensively utilized unless government programs are eliminated.
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