Yield Protection as a Risk Management Strategy
Jacob Aizikovitz, Milton, WI, defended his thesis, “Yield Protection as a Risk Management Strategy” on February 23. He is a Strategic Account Manager for Koch Agronomic Services. Aizkovitz will be a spring graduate from Kansas State University with a Master of Agribusiness (MAB) degree.
Due to changing weather and climate cycles from season to season, many farmers rely on risk management tools to reduce their business risk. These tools, such as crop insurance, forward contracting and hedging, can help prevent the economic impact that a poor crop can bring to a farmer. Low market prices, higher input prices relative to market prices and high land cost trends in recent years have caused some farmers to experience low profit margins, leading to an increased dependence on risk management strategies. Protection yield, a possible risk management tool, may be used by farmers to protect the bushels a crop is able to produce and increase a farmer’s revenue.
“This thesis examines how yield protection, specifically corn, can be utilized as a risk management tool for crop production farmers,” Aizikovitz said.
Using historical data from crops treated with fungicide to protect yield, versus crops left untreated, he found that yield protection leads to an increase in corn yield. However, this also showed inconsistent statistical significance across treatments and crop location. This led to his conclusion that the average yield increase caused by yield protection does not fit as a grain corn risk management strategy annually due to the small margin of profit it can produce.
Dr. Christine Wilson, Professor, Director of Undergraduate Programs and Aizikovitz’s thesis advisor, said, “While Jacob’s thesis results do not support pursuing yield protection as a risk management strategy on an annual basis, his work does contribute to the on-going and important evaluation of risk management strategies for producers. His research is consistent with work at Iowa State University, and does suggest yield protection at specific thresholds.”
The full thesis publication can be found online on Kansas State University’s Research Exchange at http://hdl.handle.net/2097/38662.