Economic Effects of Crop Rotations for Cotton, Corn and Peanuts under Risk

Abstract

This study provides an economic analysis of crop rotations for cotton, corn and peanuts under varying degrees of producer risk. Data for the study come from two experiments located in Alabama. Irrigation and crop insurance are examined to determine their efficacy for reducing risk. Enterprise budgets for each rotation were developed to determine the economic value of the different rotations. A Target MOTAD model was then used to determine optimal cropping strategies. Results of this study, although limited to the experimental data compiled, indicate that under irrigation, continuous cotton may be the most profitable alternative without crop insurance, but that a risk-averse farmer using crop insurance to protect against losses may prefer rotations with peanuts. For dryland, continuous peanuts were the most profitable without crop-insurance, but with crop-insurance, a cotton-peanut rotation would be preferred. Corn, or corn in rotation with peanuts, was not economically competitive with cotton based on the assumptions used in this study even though it had an important effect on increasing peanut yields.