SCC076: Economics and Management of Risk in Agriculture and Natural Resources
Statement of Issues and JustificationRisk and uncertainty are pervasive in agriculture and other natural resource industries. Decisions are constrained by limited and uncertain knowledge. The unpredictability of future weather, vagaries of government policies affecting resource values and commodity prices, and the growing importance of environmental considerations in policy-making add to the uncertainty surrounding decision analysis. Although these uncertainties are widespread, their nature and impact vary across firms, regions, and government agencies. Much progress has been made in understanding decision-making under uncertainty, but the knowledge base is incomplete. There is a continuing need to examine both short- and long-term effects of risk in agriculture and other natural resource based industries. Recent developments in both commodity and financial markets highlight the importance of understanding the ever changing nature of risk and risk management in production, both on the input and output side, as well as prices. Of a particular importance and interest is the study of the integration between the food and energy markets and the consequences of such integration with respect to risk and risk management. Better understanding of how risk management practices affect the economic and natural environment, influence the adoption of new technology, and interact with public policies will improve firm-level decision-making and aid policy-makers in addressing important policy issues related to risk. One of the strengths of the predecessor regional projects has been the national scope of the institutions represented by the participants. Although some risk problems and research opportunities may be primarily of local interest, the earlier projects have demonstrated that the analytical procedures developed and presented by project participants can often be successfully applied to understanding and addressing a variety of local risk problems. Hence, the information exchanged among project participants generates local benefits for the institutions represented. In addition, the information exchange format creates opportunities for researchers to interact on issues of mutual interest, sometimes fostering extramural grant-writing efforts. The renewal of SCC-76 would continue an almost 35-year tradition of bringing together researchers from around the country to strengthen and coordinate research and policy efforts related to risk analysis. Research conducted and presented within the predecessor regional projects focused on characterizing producer attitudes toward risk, deriving distributional aspects of commodity prices and yields, and developing improved decision models for considering risk from the perspective of the individual decision-maker. Due largely to the efforts of participants in those earlier projects, consideration of risk is now widespread in applied agricultural economics research. Many of the methods developed under previous projects and presented at annual meetings are now widely utilized by agricultural and natural resource economists who have themselves never been formally affiliated with these projects. Over the years, participants have thought it important to broaden the scope of the project beyond just farm-level decision-making to include broader agricultural and natural resource risk issues. This has proven quite beneficial in that it has attracted researchers with broader interests, while still maintaining a core group with interests in farm-level decision-making. Synergies have resulted as participants share cutting-edge approaches to risk analysis as practiced in specific sub-disciplinary areas. Bridging these sub-disciplinary boundaries allows participants to consider alternative approaches that may benefit their specific risk research programs. The continued participation of individuals from government entities suggests that research presented at the annual meetings has important public policy implications.
Last Modified: 29-Jun-2009
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