Intertemporal Risk Management Decisions of Farmers under Preference, Market, and Policy Dynamics



Table 5. Impacts of Market Institutions and Government Policies on

Farmers’ Optimal Risk Management Portfolio

Alternative Portfolios

Hedge Ratio

Crop Ins.
Coverage

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30% Premium

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Year1

Year2

Year3

Year4

Year5

Year1-5

CE($)

CE($)

With Transaction Cost ($0.017/Bushel)

H & CI & G(DP, LDP, CCP)

0.25

0.31

0.32

0.32

0.26

0.85

62.28

62.15

H & CI & G(DP, LDP)

0.39

0.44

0.44

0.44

0.38

0.85

48.82

48.69

H & CI & G(DP)

0.28

0.57

0.65

0.72

0.74

0.85

34.58

34.45

H & CI

0.32

0.59

0.66

0.72

0.74

0.85

4.81

4.68

CI & G(DP, LDP, CCP)

--

--

--

--

--

0.85

62.20

62.07

Without Transaction Cost ($0/bushel)

H & CI & G(DP, LDP, CCP)

0.42

0.39

0.37

0.35

0.27

0.85

62.68

62.54

H & CI & G(DP, LDP)

0.61

0.54

0.50

0.48

0.39

0.85

49.39

49.26

H & CI & G(DP)

0.78

0.79

0.77

0.79

0.77

0.85

35.44

35.31

H & CI

0.78

0.79

0.77

0.79

0.77

0.85

5.67

5.54

CI & G(DP, LDP, CCP)

^B ^B

^B ^B

^B ^B

^B ^B

^B ^B

0.85

62.20

62.07

Note: The base portfolio is the portfolio that includes all risk management tools, i.e. H & CI & G(DP, LDP, CCP).

49



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