Economic impacts of ENSO forecast information for winter wheat and stocker cattle production

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Title: Economic impacts of ENSO forecast information for winter wheat and stocker cattle production
Author: Liu, Xiaolan
Abstract: Accurate forecasting of El Ninƒko events would prove very valuable to winter wheat producers in the Southern High Plains of Texas . Variability of rainfall is one of the greatest hazards affecting crop production and stocker cattle production in dryland regions , and typically associated with low and unstable crop yield due to unreliable rainfall . Winter wheat used as dual purpose (DP ) crop for grain and grazing has been used to improve profitability in the region by producing two sources of revenue and providing management flexibility in times of inter -seasonal weather variability . Integrating accurate seasonal weather forecasts into management strategies would improve management strategy and provide opportunities to refine production plans to fit forecasted weather conditions . It has been demonstrated that the El Nin5o Southern Oscillation (ENSO ) phenomenon is the main source of inter -annual climate variability in many parts of the world . This study analyzed the impacts on farm -level decision making that would result from improved forecasts based on the effects of ENSO during the winter growing season for wheat and stocker cattle producers in the South Plains region of Texas . Profit projections for this study were based on simulated yields of wheat grain and forage data for Plainview , Texas from 1915 -1990 . The study evaluated 75 scenarios of management strategies , including alternative planting dates , seeding densities , and fertilizer application rates . The ENSO forecasts included one observed weather condition (representing a perfect forecast method ) and three alternative forecast methods which varied by the number of phases and the monthly ENSO index used . This study provides two approaches¡Xthe deterministic economic model on fixed price and the stochastic simulation economic model , in order to compare the results of the two approaches . The results obtained from stochastic dominance analysis of this study found that a dominant management strategy did exist for each weather condition (wet , dry , normal ) , and the level of risk aversion of the decision maker influenced the corresponding rankings of the other strategy preferences . Grazing winter wheat as dual purpose crop had a significant effect on profitability of dryland winter wheat production and negative returns were obtained from wheat grain -only production in all alternative strategies under dry weather condition . The value of information (VOI ) was calculated for each of the three forecasting methods as they relate to winter wheat and stocker cattle production . Each method had a relative value of information with the five -phase June -July method (5P -JJ ) having the highest value for wheat -grain producers . This study emphasizes the fact that dryland farmers could improve their profits or reduce their losses by incorporating ENSO forecasts into management decision making process when given weather expectations of the coming season from improved forecasts .
URI: http : / /hdl .handle .net /2346 /11234
Date: 2007-12

Citation

Liu, Xiaolan Economic impacts of ENSO forecast information for winter wheat and stocker cattle production. Master's thesis, Texas Tech University. Available electronically from http : / /hdl .handle .net /2346 /11234 .

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