Risk Analysis of Adopting Conservation Practices on a Representative Peanut-Cotton Farm in Virginia
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The objective of this study is to evaluate the costs of reducing pesticide, nitrogen, phosphorus, and sediment losses of a representative risk-neutral and risk-averse peanut-cotton farmer in Southeast Virginia. Five currently popular rotations and eight alternative conservation rotations are evaluated for the representative farm. The Erosion-Productivity Impact Calculator (EPIC) model is used to simulate pesticide, nitrogen, phosphorus, and soil loss from each rotation using actual rainfall and temperature data from the study area. A Target-MOTAD mathematical programming model, REPVAFARM, is developed and solved with GAMS. The objective of the farmer is to maximize expected net return, while meeting a target income with certain allowable expected shortfall from the income target. The farmer is also constrained by land, labor, peanut quota, and levels of pesticide, nitrogen, phosphorus, and soil losses. Major findings of this study are: reducing pesticide, nitrogen, phosphorus, and soil losses imposes costs to the farmer regardless of his risk attitude, with costs ranking from high to low in the order of reducing all pollutant losses, reducing nitrogen losses, reducing phosphorus losses, reducing soil losses, and reducing pesticide losses. Costs of reducing pollutant losses are higher for more risk-averse farmers than for less risk-averse and risk-neutral farmers implying that risk-aversion is an obstacle to the adoption of alternative conservation practices. Reducing pesticide losses has little impact on other pollutants. Reducing pesticide and nitrogen losses simultaneously achieves similar reductions in soil loss and phosphorus loss.
- Masters Theses