Production, Consumption and Risk in Agricultural Economics

Qiujie Zheng

This dissertation consists of three studies that estimate models for agricultural risk, production and consumption. Crop yield distributions are modeled and risks evaluated to make recommendations for insurance premiums for developing risk management tools. Crop supply for biofuels is estimated by incorporating crop yield and price risk. Consumer apple variety choice and demand are analyzed based on a large household-level dataset. The first study applies a nonparametric method to estimate bivariate yield distributions based on farm-level yield data of wheat and corn in Shandong Province and wheat and rice in the Yangtze River Delta area in China. The simulated yield distributions are used to evaluate the expected indemnity of one traditional and one hypothesized crop insurance program. Our results indicate that nonparametric methods are very flexible in describing the shapes of yield density functions to reveal local idiosyncrasies and correlation between two crops. The hypothesized two-crop insurance contract is affordable to farmers than traditional individual crop insurance contracts. The second study uses three models to estimate supply equations under output price and quantity uncertainty for major biofuel feedstock crops in Washington State. Farmers are assumed to be risk averse and maximize the expected utility of profit and uncertainty. Based on state, regional, and national data, we find low likelihood that Washington crop producers will become a major source of crop-based biofuel feedstocks in the foreseeable future. The third study uses household-level Nielson Homescan data to analyze consumer apple variety choices and demands with a two-step estimation model. This paper combines prices, household demographics, state dependence variables, as well as regional and seasonal effects to analyze household apple variety choices and purchases. We find that price and income play an important role in both the purchase and quantity decisions of a household. Household demographic characteristics such as age and presence of kids have different impacts on purchases by varieties, which can be explained by the internal attributes and uses/functions of specific apple varieties. Significant regional and seasonal effects are also found.

Production, Consumption and Risk in Agricultural Economics

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