Time and Risk

As the discussion here has shifted from deterministic models of production and profit to stochastic models with risk, the dimension of time was made explicit in the crop production process. The time between the crop planting decision and the sale of the crop was identified as a source of risk. Time is a critical dimension of biological processes. Longer periods between the planting decision and final sale of the product may allow for increased risk. More shocks to production and to markets may occur over a longer period of time. Therefore, decisions that commit farmers’ resources over a longer period to production of a specific crop may entail more risk. A subsequent section examines risk mitigation. Time is also an important underlying factor in the finance of inputs, including operating inputs such as seed and fertilizer, as well as longer-term assets such as machinery and land.

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