SCC_Temp76: Economics and Management of Risk in Agriculture and Natural Resources
(Multistate Research Coordinating Committee and Information Exchange Group)
Status: Submitted As Final
SCC_Temp76: Economics and Management of Risk in Agriculture and Natural Resources
Duration: 10/01/2024 to 09/30/2029
Administrative Advisor(s):
NIFA Reps:
Non-Technical Summary
Risk and uncertainty are pervasive in agriculture and other natural resource industries. While much progress has been made in understanding decision-making under uncertainty, the need for advanced understanding of the matter keeps growing due to the continually evolving nature of risk, its impacts, and responses. The renewal of SCC-76 would continue the long tradition of bringing together researchers from around the country to strengthen and coordinate research and policy efforts related to risk analysis. The group will have the following objectives: a) Provide a scientific and professional forum to facilitate the exchange of theoretical and methodological approaches to risk and policy analyses in the economics of agricultural and natural resources; b) Develop and communicate micro-level analysis of production, financial, price/marketing, managerial, and environmental risks and risk management strategies in agriculture; c) Develop new methods for micro-level modeling of how risk impacts a range of important natural resource and environmental risk issues; d) Develop new empirical approaches to assess the impacts of climate change on agricultural and natural resources management; e) Develop and apply economic theory and the behavioral foundations of decision-making under uncertainty; f) Evaluate the impact of public policy on the risk environment of individuals, firms, and sectors within the agricultural economy. The group will hold annual multi-day professional meetings and produce various research outcomes based on the exchanges in the meetings and among the group members.
Statement of Issues and Justification
Stakeholders in agricultural and natural resource industries face risk and uncertainty and hence their decisions are constrained by limited and uncertain knowledge about the various sources of risk. Climate change and weather variability, price instability, changes in policy and trade environment, and growing concerns in supply chain disruption, mainly caused by international war/conflicts (e.g., Ukraine-Russia War) and global pandemic can all influence and provide challenges to the stakeholders.
While the literature has evolved and contributed to the better understanding of decision-making process under uncertainty, the needs for more research outputs have been greater than ever with the current environment. Risk of extreme weather events and climate change has been affecting crop producers globally. Climate change mitigation policies such as biofuel policy and conservation programs have also provided challenges and opportunities to agricultural stakeholders and their risk profiles. With the global Covid-19 pandemic, unprecedent global-level supply and demand shocks have also influenced the agricultural and natural resource industries presenting a new type of risk to the stakeholders and their decision-making process. International market also has been moving rapidly especially with increased tension in trade environments (e.g., US-China trade war) and war/conflicts (e.g., Ukraine-Russia War). Supply chain disruptions are also one of the increasing sources of risk to the stakeholders. The renewal of SCC-76 will provide the opportunities for the project participants not only to continue the core research on improving the understanding of decision-making process under uncertainty but also develop new conceptual framework and empirical methods to improve our understanding of these new and evolving risks and how they affect the stakeholders.
The renewal of SCC-76 would continue the long tradition of providing opportunities for researchers from around the country to strengthen and coordinate research and policy efforts related to various issues related to risk and uncertainty. Research conducted and presented within the predecessor projects improved our understanding producer attitudes toward risk, deriving distributional aspects of commodity prices and yields, and developing improved decision models for considering risk from the perspective of the individual decision-maker. The project participants also formed collaborative groups, which also led to innovative projects. The participants and the predecessor projects have greatly contributed to the literature and the focus on risk and uncertainty is now widespread in applied agricultural economics research and agricultural farm policy. Many of the methods and frameworks developed under previous projects and presented at annual meetings are now used widely within the discipline and also in multidisciplinary contexts.
While maintaining a core group with interests in farm-level decision-making policy analysis within the context of uncertainty in farming and natural resources sectors, the participants of the previous projects have worked on connecting the research outputs of the group to the other subdisciplines. Synergies have resulted as the cutting-edge approaches to risk and policy analyses that were developed during the collaborations and meetings stemmed from the project reaching specific sub-disciplinary areas such as environmental economics and international development economics. Such efforts of the participants resulted in the consideration of alternative approaches by other researchers that may benefit their specific risk research programs. The continued participation of individuals from government entities suggests that research presented at the annual meetings has important public policy implications.
Objectives
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Provide a scientific and professional forum to facilitate the exchange of theoretical and methodological approaches to risk and policy analyses in the economics of agricultural and natural resources, and to nurture the development of original concepts and preliminary research efforts related to agriculture and natural resources
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Develop and communicate micro-level analysis of production, financial, price/marketing, managerial, and environmental risks and risk management strategies in agriculture, including analysis of how these risks impact (and are impacted by) government policies, technology adoption, and access to information.
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Develop new methods for micro-level modeling of how risk impacts a range of important natural resource and environmental risk issues, including forest, wildlife, and range management, ground- and surface-water management, the environmental sustainability of agricultural production systems, and conflicts in resource demands between agricultural and competing users.
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Develop new empirical approaches to assess the impacts of climate change on agricultural and natural resources management
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Develop and apply economic theory and the behavioral foundations of decision-making under uncertainty, including extensions of and challenges to expected utility theory, understanding decision-maker risk attitudes within a portfolio context, prospect theory and risk and ambiguity aversion.
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Evaluate the impact of public policy on the risk environment of individuals, firms, and sectors within the agricultural economy, including exogenous trade shocks, food safety regulations, and commodity income support programs, changes in financial and agricultural insurance institutions, bioenergy, and resource pricing policies
Procedures and Activities
Annual meetings will continue to be held to allow for the exchange of information on risk and uncertainty. Advertisement of the meetings will be designed to reach a large number of potential participants primarily through the existing mailing list and collaboration with the Applied Risk Analysis (ARA) and Agricultural Finance and Management (AFM) sections of the Agricultural and Applied Economics Association (AAEA). Program schedules will be distributed prior to the meeting to attract additional participation. Predecessor projects had several presentations from the 2008 annual meeting resulted in papers published in the April 2009 issue of JARE and the 2012 annual meeting resulted in a special edition published in Choices Magazine. Moving forward, the SCC group will also continue to align activities and efforts ARA and AFM sections, USDA Risk Management Agency and Economic Research Service, Federal Reserve Bank, industry partners like National Crop Insurance Service and Verisk, and journals such as the Agricultural Finance Review to publish themed issues on risk related topics.
Expected Outcomes and Impacts
- Annual multi-day professional meetings (scheduled in spring) that provide exchange of ideas, information/data, and research results.
- Facilitation and coordination of research and extension programs (and grant activities) surrounding the themes outlined in the project objectives.
- Research results and insights which can directly inform and evaluate farm policy and trends in agriculture and its impact on farm-level decisions and the future landscape of agriculture.
- Continuing the groups longstanding tradition of partnering with various peer-reviewed journals to deliver timely policy relevant special issues. Comments: For the last several years, discussions in the meeting resulted in forming several special issues for the journal, Agricultural Finance Review. The most recent example is “Financing Resilient Food Systems”, https://www.emeraldgrouppublishing.com/calls-for-papers/financing-resilient-food-systems. In 2012, SCC-76 made arrangements with Choices Magazine to publish a number of papers that were presented at the annual meeting. These six papers were published as a special issue entitled “Current Issues in Risk Management and U.S. Agricultural Policy.” This particular outlet allows the SCC-76 group’s research to reach beyond its typical audience as the magazine is targeted to non-economists and mostly targets policy-makers, extension agents, commodity organizations, and farmers. In 2008, SCC-76 made arrangements with the Journal of Agricultural and Resource Economics (JARE) to publish a number of papers that were presented at the annual meeting. These papers, in the general areas of (i) Advances in Risk Modeling Theory and Methodology, (ii) Insurance and Government Policy, and (iii) Market Instruments: Weather Derivatives, Commodity Futures and Options, were published in the April 2009 issue of JARE. Discussions among members of the SCC-76 group directly led to the formation of the new Applied Risk Analysis Section of the Agricultural and Applied Economics Association. The group plans on seeking more of these opportunities with the potential outlets being Agricultural Finance Review, Journal of Risk and Insurance, The Geneva Papers on Risk and Insurance – Issues and Practice.
- Formal interaction with industry and government agencies in the agricultural risk management/analysis area. Comments: These interactions will result in academic research that is more focused on risk issues and problems being faced in practice, as well as feedback on the most effective way to present our academic research to have an impact on policy. In 2018, the group decided to hold its annual meetings in Kansas City, MO to enhance interaction with staff from National Crop Insurance Services, the Risk Management Agency of the USDA, and Federal Reserve Bank of Kansas City. All three organizations have offices in Kansas City, which makes it much easier for their staff to participate in our meetings. Based on the success of the 2018 meeting, the group has since held the annual meeting each year in Kansas City, formally providing time on the program for these organizations to present on agricultural risk topics. The 2024 meeting will be held at the Federal Reserve Bank of Kansas City. Also, in 2021, many of group members were featured in the CFARE webinar, https://www.cfare.org/items/agricultural-risk-management-and-climate-change-adaptation, which the group plans on seeking similar opportunities.
Projected Participation
View Appendix E: ParticipationEducational Plan
Although this project does not have a specific extension and outreach component, a key role of this group is to foster the development of the field, especially the support and furthering of new research ideas on risk and risk management. Information developed in this project will be disseminated to stakeholders and scientific audiences through refereed journal articles, conference abstracts, extension bulletins when appropriate, AgEcon Search website, and through our annual meetings and reports. The project will also continue to maintain its web page which will be updated by the Chair of the committee.
Organization/Governance
Administrative issues will be addressed during the business meeting held in conjunction with the annual meeting. During the business meeting elections will be conducted to fill the position of program chair. The program chair coordinates the program for the next annual meeting. The out-going program chair becomes the project chair and is responsible for conducting the business meeting, submitting an annual report on project activities, and maintaining communication with the administrative advisor and the Southern Association of Agricultural Experiment Station Directors.
Since 2022, the leadership consists of two-person committee; i) program chair and ii) accommodation chair/treasurer.
Literature Cited
Selected Works to Highlight Collaboration Among Project Members
Adkins, K., C.N. Boyer, S.A. Smith, A.P. Griffith, and A. Muhammad. 2020. “Analyzing Corn and Cotton Producers Optimal Prevented Planting Decision on Moral Hazard.” Agronomy Journal 112(3):2047-2057. (Link)
Boyer, C.N., and A.P. Griffith. 2021. “Livestock Risk Protection for Feeder Cattle during COVID-19.” Choices Quarter 4. (Link)
Boyer, C.N., A.P. Griffith, and K.L. DeLong. 2021. “Evaluating Optimal Purchasing and Selling Decisions of Beef Cattle Replacement Females.” Agricultural Finance Review 81(3):430-443. (Link)
Boyer, C.N., K. Burdine, J. Rhinehart, and C. Martinez. 2021. “Replacing Late Calving Beef Cows to Shorten Calving Season.” Journal of Agricultural and Resource Economics 43(2):228-241. (Link)
Boyer, C.N., K. Zechiel, P.D. Keyser, J. Rhinehart, and G. Bates. 2020. “Risk and Returns from Grazing Beef Cattle on Warm-Season Grasses in Tennessee” Agronomy Journal 112(1):301-308. (Link)
Boyer, C.N., A.P. Griffith, and K.L. DeLong. 2020. “Reproductive Failure and Long-Term Profitability of Spring and Fall Calving Beef Cows.” Journal of Agricultural and Resource Economics 45(1):78-91. (Link)
Bruhin, J., C. Trejo-Pech, C.N. Boyer, and S.A. Smith. 2022. “Profitability, Risk, and Cash Flow Deficit for Beginning Cow Calf Producers.” Agricultural Finance Review 82(1):1-19. (Link)
Campbell*, K., C.N. Boyer, D.M. Lambert, C.D. Clark, and S.A. Smith. 2021. “Risk, Cost-Share Payment, and Adoption of Cover Crops and No-Till.” Journal of Soil and Water Conservation 76(2):166-174. (Link)
Cai, Qingyin, et al. "The influence of past experience on farmers’ preferences for hog insurance products: a natural experiment and choice experiment in China." The Geneva Papers on Risk and Insurance-Issues and Practice 46.3 (2021): 399-421.
Chen, L., Rejesus, R.M., Aglasan, S., Hagen, S. and Salas, W., 2023. The impact of no‐till on agricultural land values in the United States Midwest. American Journal of Agricultural Economics, 105(3), pp.760-783.
Cho, W., and B.W. Brorsen. 2021. “Evaluation of RI-PRF Crop Insurance Program Design.” Journal of Agricultural and Resource Economics. 46:85-100.
Davidson, K.A. and Goodrich, B.K., 2023. Nudge to insure: Can informational nudges change enrollment decisions in pasture, rangeland, and forage rainfall index insurance?. Applied Economic Perspectives and Policy, 45(1), pp.534-554
Ghosh, Prasenjit*, Ruiqing Miao, and Emir Malikov. 2023. “Crop Insurance Premium Subsidy and Irrigation Water Withdrawals in the Western United States.” The Geneva Papers on Risk and Insurance – Issues and Practice. 48(4): 968-992. doi: https://doi.org/10.1057/s41288-021-00252-4
Hadachek, Jeffrey, Ma, Meilin, and Sexton, Richard J.. 2023. Market Structure and Resilience of Food Supply Chains under Extreme Events. American Journal of Agricultural Economics 1– 24. https://doi.org/10.1111/ajae.12393
Majeed, Fahd, Madhu Khanna, Ruiqing Miao, Elena Blanc-Betes, Tara Hudiburg, and Evan H. DeLucia. 2023. “Carbon Credit Markets Can Reduce the Riskiness of Bioenergy Crop Production.” Journal of the Agricultural and Applied Economics Association 2(2): 181-197. doi: https://doi.org/10.1002/jaa2.52
Miao, Ruiqing. 2020. “Climate, Insurance, and Innovation: The Case of Drought and Innovations in Drought-Tolerant Traits in U.S. Agriculture.” European Review of Agricultural Economics 47(5):1826-1860. doi: https://doi.org/10.1093/erae/jbaa010
Miao, Ruiqing, Hongli Feng, David A. Hennessy, Gaurav Arora, and Charles R. Loesch. 2023. “Grassland Easement Acquisition: Conversion Hazard Rate, Additionality, Spatial Spillover, and Heuristics.” Applied Economic Perspectives and Policy 45(2): 928-946. doi: https://doi.org/10.1002/aepp.13318
Miao, Ruiqing, David A. Hennessy, and Hongli Feng. 2022. “Grassland Easement Evaluation and Acquisition with Uncertain Conversion and Conservation Returns.” Canadian Journal of Agricultural Economics 70(1):41-61. doi: http://doi.org/10.1111/cjag.12302
Niyibizi, B., B.W. Brorsen, and P.D. Alderman. 2021. “Robustness of the Impact of Climate Change on U.S. Corn Yields.” Journal of Agribusiness. 39(2): 133-151.
Park, E., B.W. Brorsen, and A. Harri. 2020. “Spatially Smoothed Crop Yield Density Estimation: Physical Distance vs Climate Similarity.” Journal of Agricultural and Resource Economics. 45(3):533-548.
Pinto, A.F., Goodrich, B.K., Kelley, W. and Runge, M., 2023. Price determinants of bred heifers: Do reputations matter?. Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie.
ShalekBriski, A., B.W. Brorsen, J. Rogers, J.T. Biermacher, D.A. Marburger, and J. Edwards. 2021. “Design of the Rainfall Index Annual Forage Program.” Agricultural Finance Review. 81(1):114-131. doi:10.1108/AFR-11-2019-0120
Tsiboe, F. and Tack, J., 2022. Utilizing Topographic and Soil Features to Improve Rating for Farm‐Level Insurance Products. American Journal of Agricultural Economics, 104(1), pp.52-69..
Tsiboe, F. and Turner, D., 2023. Econometric identification of crop insurance participation. Agricultural and Resource Economics Review, pp.1-22.
Turner, D. and Tsiboe, F., 2022. The crop insurance demand response to the Wildfire and Hurricane Indemnity Program Plus. Applied Economic Perspectives and Policy, 44(3), pp.1273-1292.
Wang, H.H., Liu, L., Ortega, D.L., Jiang, Y. and Zheng, Q., 2020. Are smallholder farmers willing to pay for different types of crop insurance? An application of labelled choice experiments to Chinese corn growers. The Geneva Papers on Risk and Insurance-Issues and Practice, 45, pp.86-110.
Wang, H.H., Tack, J.B. and Coble, K.H., 2020. Frontier studies in agricultural insurance. The Geneva Papers on Risk and Insurance-Issues and Practice, 45, pp.1-4.
Won, S., Rejesus, R.M., Goodwin, B.K. and Aglasan, S., 2023. Understanding the effect of cover crop use on prevented planting losses. American Journal of Agricultural Economics.
Yu, Chengzheng*, Ruiqing Miao, and Madhu Khanna. 2021. “Maladaptation of U.S. Corn and Soybeans to a Changing Climate.” Scientific Reports. doi: https://doi.org/10.1038/s41598-021-91192-5
Yu, J. and Goh, G., 2022. Estimating temperature impacts on perennial crop losses in California: Insights from insurance data. Applied Economic Perspectives and Policy, 44(3), pp.1409-1423.
Yu, J., Goodrich, B. and Graven, A., 2022. Competing farm programs: Does the introduction of a risk management program reduce the enrollment in the Conservation Reserve Program?. Journal of the Agricultural and Applied Economics Association, 1(3), pp.320-333.