The three marketing strategies, buying a put option, cash sale at harvest, and cash sale in
June after December harvest, are simulated for six representative irrigated and dryland
cotton farms in West Texas. Each marketing strategy is ranked using the net cash
income probability distribution for the representative farms using stochastic efficiency
with respect to a function (SERF).
SERF rankings were consistent across dryland and irrigated farms. The buying
of a put option was found to be the marketing strategy that produced the highest
certainty equivalent (CE) for normal risk averse decision makers. Cash sale at harvest
followed by cash sale in June marketing strategies were ranked second and third,
respectively. A sensitivity analysis increased the national baseline price used in the
model by 45 percent. Cash sale at harvest then consistently became the highest ranked
marketing strategy followed by buying a put option and then cash sale in June. The
research found that if a strike price and premium that covered the production costs of the
representative farm was available during the pre-harvest period, the decision maker may
have the ability to increase utility by hedging with the put option.
| Identifer | oai:union.ndltd.org:tamu.edu/oai:repository.tamu.edu:1969.1/ETD-TAMU-2858 |
| Date | 15 May 2009 |
| Creators | Elrod, Christopher Patrick |
| Contributors | Richardson, James W. |
| Source Sets | Texas A and M University |
| Language | en_US |
| Detected Language | English |
| Type | Book, Thesis, Electronic Thesis, text |
| Format | electronic, application/pdf, born digital |
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