Economic Evaluation of Protection against Freezes in Satsuma Mandarin Production

Abstract

This dissertation consists of three essays that evaluate the effect of freeze-risk reduction techniques on discounted net returns for Satsuma mandarin (Citrus unshiu Marc.) in the northern Gulf Coast region of the United States. In all studies, enterprise budgets are simulated over a 20-year investment horizon. Mean and distribution of net returns, and break-even prices are used to compare risk reduction methods. The first essay evaluates the effect of multi-peril crop insurance and freeze protection with micro-sprinkler irrigation on discounted net returns for one-acre grove units. Using weather data from the period 1948-2004, freeze occurrence probabilities for the Fairhope, Alabama area were calculated to be 14-percent for severe freeze and 11-percent for moderate freeze. Freeze protection in combination with crop insurance resulted in the highest mean and lowest variability in net return at market prices above break even. Increased yields and net returns due to freeze protection were attributed to the elimination of the need to replant after a severe freeze. Government subsidy for crop insurance premiums increased total discounted net returns; and indemnities lowered the distribution of negative net returns for the 20-year simulation period. In the second essay, micro-sprinkler and high tunnel technologies for freeze protection are compared to no protection for 10-acre Satsuma groves in the Fairhope, AL area. Micro-sprinkler technology eliminates the tree loss, but not crop loss, due to freezes. High tunnel technology eliminates the loss of either trees or crop for any freeze event. Relative to the high tunnel groves, average yield over the 20-year period was reduced by 25-percent for micro-sprinkler irrigated groves and 53-percent for unprotected groves. The high tunnel strategy was preferred to the micro-sprinkler protection only at market prices above $0.83 per pound. In the third essay, net returns for groves with micro-sprinkler and high tunnel technologies were compared to no protection at varying freeze probability levels. With severe freeze probability levels of 5-percent and greater, net returns for micro-sprinkler groves were greater than for unprotected groves. At a market price of $0.50 per pound, high tunnel groves had greater mean net returns than the micro-sprinkler technology only when total freeze events exceeded 50-percent.