Income, price, and yield variability for principal California crops and cropping systems

Abstract does not appear. First page follows.

Introduction

Favorable soil and climatic conditions in California enable the majority of farmers to select from among many different types of crops and cropping systems. Other considerations such as access to markets, specialized abilities and experiences, availability of labor and mechanical equipment, and relative product and resource prices which may give individual managers comparative advantages also influence the farm manager’s decisions. Another important factor in selecting cropping systems is the manager’s attitude toward the “uncertainty” or “risk” associated with different crops; with respect to price and yield, some crops are “high risk” while others are “low risk.” Managers’ views concerning the uncertainties. of crop production are strongly influenced by past experience. However, experience is often limited (e.g., in the case of new farmers), or based on a “biased” sample of unusual years. Therefore, the purpose of this study is to provide a more objective measurement of the “uncertainty” or variability associated with various crops and cropping systems in California.

Risk and Uncertainty

Following (Knight (1921)),4risk and uncertainty are distinguished as two different phenomena. Risk refers to situations where parameters (such as the mean and variance) of the probability distribution of outcomes can be estimated so as to be actuarially insurable; in other words, the variability of outcomes can be measured empirically or quantitatively. Uncertainty, on the other hand, refers to those situations in which the parameters of the probability distribution of outcomes cannot be empirically or quantitatively determined.