Farm‐Level Economic Analysis Incorporating Stochastic Environmental Risk Assessment

Abstract

Abstract A farm‐level risk programming framework is presented which evaluates income/ environmental risk tradeoffs. This framework uses a time‐series of environmental risk indices to incorporate the stochastic, multiattribute characteristics of environmental outcomes associated with agricultural production practices. The model is applied to a representative farm in the Oklahoma Panhandle region of the Central High Plains. Results indicate that expected income is sensitive to nitrate loading restrictions, and relatively less sensitive to pesticide loading restrictions. Results also indicate that prescriptions derived using deterministic environmental risk measures may ignore significant probabilities of exceeding an environmental standard.