Essays on agricultural risk management and agribusiness marketing
Abstract
This thesis consists of an essay on agricultural risk management and an essay on agribusiness marketing. The essay on agricultural risk management evaluates criteria that aid agricultural producers in their choice among risk management alternatives. The results of the essay suggest that recognizing the role of financial leverage is important in risk management contexts. The gross returns associated with several risk management strategies were simulated and compared with the mean-variance, mean-risk, ordinary first and second degree stochastic dominance (SD), and first and second degree stochastic dominance with risk free asset (SDRA) risk efficiency criteria. The SDRA criteria extend the ordinary SD criteria by recognizing that producers can use financial leverage to alter the returns to an investment. In the analyses conducted, this recognition reduces the ordinary FSD set by 87 percent and 69 percent. Further, the SDRA criteria demonstrate that the assumption of access to leverage narrows the efficient set nearly as much as the assumption that decision makers are risk averse. Together these assumptions greatly reduce the number of risk management strategies that agricultural producers must consider. The essay also evaluated several criteria that produce rankings of risky investments. The results show that rankings produced by criteria derived from the necessary conditions for first and second degree SDRA are highly correlated with certainty equivalent rankings. The second essay uses a cluster analysis procedure to develop a market segmentation of U.S. crop and livestock farms with annual sales in excess of $100,000. The segments were developed based on the, importance of twelve factors that these producers evaluate when selecting input suppliers. The results show that four distinct segments exist: Balance buyers, Convenience buyers, Performance buyers, and Price buyers. The segments were examined with respect actors that characterize the product/service mix that these producers are likely to many factors desire. Specifically, segment membership was related to demographics, custom service use, computer use, off-farm influences on the purchase decision, brand preferences, loyalty, and preferences for salespeople.
Degree
Ph.D.
Advisors
Baker, Purdue University.
Subject Area
Agricultural economics|Marketing
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