Essays on farm yield risks and risk management decisions

his thesis is composed of an essay on risks of farm yields in Indiana and an essay on impacts of new government commodity programs on farmers’ risk management decisions. The first essay describes farm yield database collected from multiple Actual Production History (APH) records and distributions of farm yield variabilities in nine Crop Reporting Districts (CRD) in Indiana. Regressions indicate that for all representative counties farms with higher average yield have significantly lower yield variabilities. For some counties, farms with both higher average yield and larger size tend to have lower yield risks.;In the second essay, an expected utility maximization simulation model is built to make risk management portfolios decisions including government commodity programs, crop insurance, and hedging in futures. Discussions are focused on the impacts of price and yield risks on farmers’ decisions of enrolling in the Average Crop Revenue Election (ACRE) program and influences of ACRE on other risk management programs. The study suggests the optimal risk management strategy for a representative central Indiana corn farm in 2010 is Crop Revenue Coverage (CRC) with highest coverage level plus ACRE and 28 percent hedging ratios. The choice of CRC combined with ACRE is always the optimal strategy in 2010, even if the farm has higher yield risk, and low correlations of county-farm and state-farm yield correlations. On the other hand, future price movement is more influential to welfare gains from ACRE, as a...