Area Allocation Under Price Uncertainty on Dutch Arable Farms

Alfons Oude Lansink ()

Journal of Agricultural Economics, 1999, vol. 50, issue 1, 93-105

Abstract: This paper uses a Mean‐Variance utility function to build a dual model that simultaneously determines area allocation and production/input levels under output price uncertainty. Regularity conditions of the indirect utility function (convexity) and producers risk preferences are tested. The framework is applied to a rotating sample of Dutch arable farms. Dutch arable farmers are found to be risk averse, with the size of the risk premium given by 3 per cent of annual profit. A bootstrap resampling method shows that curvature conditions are rejected. Price elasticities are compared for an unrestricted model and for a model with curvature conditions being imposed.

Date: 1999
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