Risk Analysis Using Crop Simulation Models by rcr14802

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									              Risk Analysis Using
            Crop Simulation Models


          Eric Crawford, Julie Howard, Valerie Kelly



              Department of Agricultural Economics
                   Michigan State University



        Prepared for Presentation at ICRISAT Workshop on
  “Strategies for Improving Adoption of Seed and Fertilizer in Africa”
              Bulawayo, Zimbabwe, Nov. 27-29, 2000

                                                                     1
                       Michigan State University, Dept. of
                            Agricultural Economics




                       Background

• SG2000/Min. Ag. intensive maize program
• 1997 SG/MSU/MOA impact study
• 1999 Schulthess/Ward study using CERES-Maize
  crop growth model:
  – simulated performance of SG package in less
    favorable agroecological and rainfall conditions
  – Ambo (912 mm/yr); Jimma (1,570 mm/yr)
• We conducted a financial and risk analysis on
  the yields simulated by the CERES-Maize model
                                                                     2
                       Michigan State University, Dept. of
                            Agricultural Economics
              Structure of Analysis

• Net returns for each year of 6 yield scenarios for
  Jimma (20 years) and Ambo (15 years):
   – fert. + improved seed vs. local seed and no fert.
   – 3 plant densities (2, 4, 6 plants/m2)
• Costs/prices based on crop budgets from
  SG/MSU/MOA study




                                                          3
                    Michigan State University, Dept. of
                         Agricultural Economics




              Net Returns Results

• Even nonfertilized treatments gave good results
  (1.6-3.0 tons/ha; $150/ha)
• Fertilized treatments gave 1.5 to 3.0 times
  higher net returns than nonfertilized treatments
• Plant density had strong postive effect only
  when fertilizer applied
• Lower yields in (drier) Ambo were offset by
  higher maize price (closer to capital city)


                                                          4
                    Michigan State University, Dept. of
                         Agricultural Economics
                     Net Returns, Jimma

                              Sorted Net Returns: Jimma

          4000.0

          3500.0

          3000.0

          2500.0                                                       NF 2 plants/m2
          2000.0                                                       NF 4 plants/m2
                                                                       NF 6 plants/m2
          1500.0
                                                                       F 2 plants/m2
          1000.0                                                       F 4 plants/m2
           500.0                                                       F 6 plants/m2

             0.0

          -500.0

         -1000.0



                                                                                           5
                               Michigan State University, Dept. of
                                    Agricultural Economics




                     Net Returns, Jimma
              NF2           NF4           NF6               F2           F4           F6
            -355.0        -355.0        -355.0          -841.0       -841.0       -841.0
             -96.3          70.5         175.4          1290.9       2274.3       2890.9
             649.2         812.8         793.1          1463.4       2447.8       3069.1
             661.6         881.4         832.0          1505.0       2508.1       3229.1
             813.8         883.4         873.6          1709.6       2545.5       3276.4
             887.6        1101.1         983.7          1722.1       2565.2       3282.6
             901.6        1105.3        1018.0          1723.7       2599.0       3316.4
             978.0        1316.7        1051.8          1746.0       2617.2       3340.3
            1018.5        1327.6        1118.2          1758.0       2622.4       3358.5
            1142.1        1364.5        1169.7          1763.2       2630.2       3380.3
            1196.2        1367.6        1221.1          1779.3       2632.2       3382.9
            1219.5        1434.1        1221.1          1787.0       2652.0       3387.0
            1329.7        1448.1        1225.3          1854.6       2671.2       3389.1
            1339.5        1528.1        1273.6          1865.5       2679.5       3391.7
            1340.1        1573.8        1347.9          1888.9       2689.9       3400.0
            1344.7        1615.9        1364.0          1929.4       2728.3       3405.7
            1393.6        1676.2        1407.6          1946.5       2735.6       3410.9
            1400.3        1718.8        1473.6          1983.9       2768.9       3416.7
            1426.8        1746.3        1527.6          2026.5       2776.7       3546.0
            1471.0        1750.5        1531.8          2064.5       2838.5       3554.3
Mean        1003.1        1218.4        1062.7          1648.3       2457.1       3129.4
Figures in Birr per hectare; 6.70 Birr per US$
                    Net Returns, Ambo

                                  Sorted Net Returns: Ambo

          5000.0



          4000.0



          3000.0
                                                                        NF 2 plants/m2
                                                                        NF 4 plants/m2
                                                                        NF 6 plants/m2
          2000.0
                                                                        F 2 plants/m2
                                                                        F 4 plants/m2
                                                                        F 6 plants/m2
          1000.0



             0.0



         -1000.0



                                                                                         7
                              Michigan State University, Dept. of
                                   Agricultural Economics




                    Net Returns, Ambo

         NF2         NF4         NF6              F2            F4       F6
       -206.2      -173.6      -145.8          -49.0         452.8    392.4
       -137.8       -30.9        73.3          490.6        1353.5   1893.2
         79.9       303.6       425.1          589.5        1522.1   2120.9
        100.5       303.6       427.1         1421.9        2551.0   3151.0
        196.1       411.8       534.0         1682.8        2970.5   3309.7
        395.2       561.2       607.0         1828.1        3126.5   4084.3
        472.2       614.3       672.7         1968.8        3384.7   4310.7
        711.9       891.7       909.0         2064.4        3506.8   4355.1
        784.2      1092.9      1143.3         2118.2        3548.0   4359.1
        802.8      1209.7      1192.4         2151.4        3600.4   4361.8
       1665.7      1765.9      1230.3         2368.4        3601.1   4397.0
       1800.5      1874.1      1455.3         2426.2        3603.7   4491.9
       2054.0      1886.7      1709.5         2444.8        3657.5   4558.9
       2058.7      2331.5      1971.0         2565.6        3781.6   4589.5
       2261.8      2752.3      2289.0         2681.1        4038.5   4647.9
an      869.3      1053.0       966.2         1783.5        2979.9   3668.2

Figures in Birr per hectare; 6.70 Birr per US$

                                                                                         8
                              Michigan State University, Dept. of
                                   Agricultural Economics
                 Sensitivity Analysis (1)

         Jimma               NF2 a/     NF4     NF6        F2     F4     F6
             Base Scenario                  (Values = Birr/ha)
                     Mean 1003.1 1218.4 1062.7 1648.3 2457.1 3129.4
             50% Reduction in Maize Price
                     Mean     324.1   431.7   353.8    403.7   808.0 1144.2
             50% Increase in Package Cost
                     Mean     825.6 1040.9    885.2 1227.8 2036.6 2708.9
             Farmer Yields Assumed 75% of Model Yields
                     Mean     663.6     825   708.3     1026 1632.6 2136.8

         Ambo                 NF2     NF4      NF6        F2            F4      F6
            Base Scenario                  (Values = Birr/ha)
                    Mean     869.3 1053.0    966.2 1783.5            2979.9 3668.2
            50% Reduction in Maize Price
                    Mean     313.7   405.5   362.1    440.8          1039.0 1383.1
            50% Increase in Package Cost
                    Mean     748.3   932.0   845.2 1332.5            2528.9 3217.2
            Farmer Yields Assumed 75% of Model Yields
                    Mean     591.5   729.2   664.2 1112.1            2009.4 2525.7



Figures in Birr per hectare; 6.70 Birr per US$

                                                                                                  9
                               Michigan State University, Dept. of
                                    Agricultural Economics




                 Sensitivity Analysis (2)

          Percentage Reductions from Base Scenario Net Returns
                                  NF2 a/      NF4      NF6         F2         F4       F6
          50% Reduction in Maize Price
                       Jimma b/   67.7% 64.6% 66.7% 75.5% 67.1% 63.4%
                                Ave. NF 66.3%                 Ave. F 68.7%
                       Ambo       63.9% 61.5% 62.5% 75.3% 65.1% 62.3%
                                Ave. NF 62.6%                 Ave. F 67.6%
          50% Increase in Package Cost
                       Jimma c/   17.7% 14.6% 16.7% 25.5% 17.1% 13.4%
                                Ave. NF 16.3%                 Ave. F 18.7%
                       Ambo       13.9% 11.5% 12.5% 25.3% 15.1% 12.3%
                                Ave. NF 12.6%                 Ave. F 17.6%
          Farmer Yields Assumed 75% of Model Yields
                       Jimma d/   33.8% 32.3% 33.3% 37.8% 33.6% 31.7%
                                Ave. NF 33.2%                 Ave. F 34.3%
                       Ambo       32.0% 30.7% 31.3% 37.6% 32.6% 31.1%
                                Ave. NF 31.3%                 Ave. F 33.8%
          a/ Column headings: NF=nonfertilized; F=fertilized; 2, 4, 6 = number of plants per m2
          b/ I.e., for NF2 a 50% lower maize price causes net returns to fall by 67.7%.
          c/ I.e., for NF2 a 50% higher package cost causes net returns to fall by 17.7%.
          d/ I.e., for NF2 reducing model yields by 25% causes net returns to fall by 33.8%.

                                                                                                  10
                               Michigan State University, Dept. of
                                    Agricultural Economics
    Stochastic Dominance Analysis

                                Cumulative Probability Distributions, Jimma:
                                               NF4 vs. NF6

                  1.20
                  1.00
Prob of Value



                  0.80
                                                                                                                     6 plants/m2
                  0.60
                                                                                                                     4 plants/m2
                  0.40
                  0.20
                  0.00
                                 -3.55
                                          -1.44
                                                  0.66
                                                         2.77
                                                                4.87
                                                                       6.98
                                                                              9.08
                                                                                     11.19
                                                                                             13.29
                                                                                                     15.40
                                                                                                             17.50
                                                         Values in Hundreds


                                                                                                                                      11
                                                            Michigan State University, Dept. of
                                                                 Agricultural Economics




                                Using @Risk Distributions

                                Cumulative Probability Distributions, Jimma:
                                               NF4 vs. NF6
      Prob of Value <= X-axis




                                         1.2
                                           1
                                         0.8
               Value




                                                                                                                     NF 6 plants/m2
                                         0.6
                                                                                                                     NF 4 plants/m2
                                         0.4
                                         0.2
                                           0
                                  3. 03
                                 6. 319

                                 9. 129

                                 12 067

                                 15 401

                                        94
                                -3 069

                                       -




                                     30
                                    5E

                                    06

                                     0

                                     7

                                     6
                                     7




                                   13

                                   19

                                   .2

                                   .3
                                   .0
                                  .7
                                 -3




                                                          Values in Hundreds


                                                                                                                                      12
                                                            Michigan State University, Dept. of
                                                                 Agricultural Economics

								
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