Impact of Price Risk on Aggregate Farrowing Response
Hurt, Christopher Allan
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Permalink
https://hdl.handle.net/2142/66784
Description
Title
Impact of Price Risk on Aggregate Farrowing Response
Author(s)
Hurt, Christopher Allan
Issue Date
1980
Department of Study
Agricultural Economics
Discipline
Agricultural Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Language
eng
Abstract
The period since late 1972 has been a time of many economic changes and disruptions within the agricultural sector. These changes have led to greater variation in the prices of agricultural commodity prices, which has increased the likelihood of price risk. The impact of increasing levels of price risk on producer response is still not well understood. This research examines the influence of price risk on the hog breeding decision. The intent is to enhance the understanding of the factors influencing breeding decisions, which may lead to a more comprehensive understanding of the importance of price risk in economic relationships.
The models used to predict farrowing response have not provided satisfactory explanations of economic behavior in the period 1973-1978. Most of the models used to predict farrowing responses are based upon neo-classical micro economic theory. While this theory indicates the importance of price in behavioral explanations of farrowing response, it does little to identify the prices to which producers respond. A whole spectrum of prices, both historical and forward, are available to the producer in making production decisions. The manner in which producers utilize the entire spectrum is unclear.
Perhaps a greater shortcoming of neo-classical theory is the assumption of perfect knowledge. Perfect knowledge implies that producers respond to known product and input prices. In the real world, it is evident that price risk does arise in economic relationships as a result of imperfect knowledge. During periods such as 1973-1978, which were characterized by extreme price fluctuations, knowledge about prices may have been extremely imperfect. The focus of this research is the identification of price risk variables and the examination of their impact on the hog breeding decision as measured by farrowing response.
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