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The Effects of Firm Size and Production Cost Levels on Dynamically Optimal After-Tax Cotton Storage and Hedging Decisions

Published online by Cambridge University Press:  08 February 2017

Russell Tronstad
Russell Tronstad*
Affiliation:
University of Arizona
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Abstract

Farm size and production costs are varied in a six state variable stochastic dynamic programming model that quantifies monthly hedging, storage, and cash cotton sale decisions for an Alabama cotton producer. State variables considered are: (1) cash cotton price; (2) basis level; (3) before-tax income level; (4) cotton holdings; (5) futures position; and (6) value of futures position. Results indicate that when farm size and production cost level differ, marketing decisions diverge the most for cash cotton sales at the end of the tax year and lower range of cash price (less than $.65/lb.), basis (less than -$.05/lb.), and before-tax income (less than $0.00) states.

Keywords

farm sizeproduction costsstochastic dynamic programming
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 23 , Issue 1 , July 1991 , pp. 165 - 179
Copyright
Copyright © Southern Agricultural Economics Association 1991

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