Crop selection under price and yield fluctuation: Analysis of agro-economic time series from South Korea

Abstract

Temporal fluctuations of crop price and yield can have a strong influence on farmers' revenue. Under uncertainty, farmers' crop selection on -what to cultivate and how much of their land to allocate to different crops-is of crucial importance to secure their revenue as well as related ecosystem services. Multi-crop farming can be seen as a strategy to mitigate uncertainties that farmers face. In this study, we used Singular Spectrum Analysis (SSA) to quantify the fluctuations of crop price and yield for single and multiple crop selections in South Korea. Furthermore, risk adjusted revenue of each crop selection was analysed using the Sharpe ratio. We constructed three empirical crop portfolios containing one, three and five crops. For the single crop farming, six main crops in South Korea were analysed, and household data were used to build empirical crop portfolios. Our results showed that revenue from rice farming was the most stable, whereas it fluctuated strongly for pepper. However, growing rice provided the lowest revenue and farmers who cultivate multiple crops might as much as double their revenue compared to rice farming. Diversified crop farming can be a means of enhancing revenue. The biggest part of fluctuations in portfolios with several crops was seasonal, which might be mitigated by planning in advance. The artificial stability of rice price was due to policy intervention. However, it should be noted that the rice policy has been reformed and a high protection for domestic rice farming would no longer last in the future in South Korea. These results might have practical consequences for farmers' decision making on crop selection as well as for agricultural policy.

Reviewing the decision‐making behavior of irrigators

“…Secondary Environmental or climate related Weather variability (#2, for example, Foster, Brozovic, & Butler, ) Pressure to reduce greenhouse gas production (#1, for example, Arbuckle Jr. et al, ) Farm related Natural advantage (#1, Holmes & Lee, ) Policy related Water quota (#1, Buchholz et al, ) Pressure from authorities to increase production (#1, D. J. Lee et al, ) Introduction of water market (#1, S. Wheeler, Bjornlund, Zuo, & Shanahan, ) Economy related Economic value of water (#2, for example, Gómez‐Limón & Martínez, ) Changes in global economic conditions (#1, for example, H. Lee et al, ) Economies of density (#1, Holmes & Lee, ) Market related Crop price fluctuations (#1, H. Lee et al, ) Utility generated by resources (#1, Gómez‐Limón & Martínez, ) Social Observation of neighbors' action (#1, Andriyas & McKee, ) Population growth (#1, for example, Foster et al, ) …”

“…Economy related Economic value of water (#2, for example, Gómez‐Limón & Martínez, ) Changes in global economic conditions (#1, for example, H. Lee et al, ) Economies of density (#1, Holmes & Lee, ) …”

“…Secondary Income related Reduce the risks of price fluctuations (#2, for example, H. Lee et al, ) Reduce the cost of production (#2, for example, Schuck & Green, ) Yield related Improve crop quality (#1, Navarrete & Le Bail, ) Satisfying immediate food needs (#2, for example, Douxchamps et al, ) Environmental conservation Control salinity (#1, Belhouchette et al, ) Reduce soil erosion (#2, for example, Mkanda, ) Use for social and cultural event. (#1, D. J. Lee et al, ) Desire to stay on farm (#1, S. Wheeler et al, ) …”

“…Income related Reduce the risks of price fluctuations (#2, for example, H. Lee et al, ) Reduce the cost of production (#2, for example, Schuck & Green, ) …”

Bridging the food security gap: an information‐led approach to connect dietary nutrition, food composition and crop production

“…In practice, production decisions determining crop and cultivar choice by farmers are primarily driven by price, yield, and market preference, and thus tend to be poorly aligned with dietary needs . Multiple examples exist, including a shift in wheat cultivars grown in Western Australia driven by export demand for cultivars meeting market specifications for Udon noodles, cultivar preference in Ethiopia driven by environmental stability and adaptability, and breeding selection for quinoa in the Peruvian Andes driven by mildew resistance, shorter maturation, and other yield parameters .…”