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Risk and economic sustainability of crop farming systems

Lien, Gudbrand; Hardaker, J. Brian and Flaten, Ola (2007) Risk and economic sustainability of crop farming systems. Livestock Systems, 94 (2), pp. 541-552.

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Online at: doi:10.1016/j.agsy.2007.01.006

Summary

In economic terms, resilience in farming has to do with the capacity of a farm business to survive various risks and other shocks. Despite its importance, resilience has seldom been directly considered in evaluations of economic sustainability. A whole-farm stochastic simulation model over a 6-year planning horizon was used to analyse organic and conventional cropping systems using a model of a representative farm in Eastern Norway. The relative economic sustainability of alternative systems under changing assumptions about future technology and price regimes was examined in terms of financial survival to the end of the planning period. The same alternatives were also compared in terms of stochastic efficiency. To model the risk of business failure adequately there is a need to deal with the risk of bankruptcy, and a modification of traditional analysis was used for that purpose. The organic farming system was found to be somewhat less economically sustainable than the conventional system, especially if the organic price premiums and the organic area payments were to be phased out. The results illustrate possible conflicts between pursuit of risk efficiency and economic sustainability. The model developed could be used to support farmers’ choices between farming systems as well as to help policy makers develop more sharply targeted policies.


EPrint Type:Journal paper
Keywords:Sustainability; Resilience; Risk assessment; Whole-farm stochastic simulation; Stochastic efficiency; Økorisk
Subjects: Farming Systems > Farm economics
Knowledge management > Research methodology and philosophy > Systems research and participatory research
Crop husbandry > Production systems > Cereals, pulses and oilseeds
Food systems > Policy environments and social economy
Research affiliation: Australia > University of New England
Norway
Norway > NILF - Norwegian Agricultural Economics Research Institute
ISSN:0308-521
Deposited By: Flaten, Dr. Ola
ID Code:17784
Deposited On:21 Oct 2010 11:38
Last Modified:21 Oct 2010 11:38
Document Language:English
Status:Published
Refereed:Peer-reviewed and accepted

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