Very, very stimulating thoughts. Intuitively, I recognize the relationship
you are describing. When virtually every corn grower in the ten largest
corn-producing states follows the same high-yield management steps, there
is a common vulnerability to weather and/or disease risk. When things work
well, they really work well; when things fail, the failure is replicated
virtually everywhere at once, especially so in corn production, it seems to
This is a "macro" effect over the whole region where corn growing (and
maybe to a slightly lesser degree other crops, too) steps have become
"homogenized"..... However, the context of the original risk assessment
query had a "micro" economic focus. For the individual grower (corn, or
otherwise) he can be fairly daunted by the possibility of yield reduction
when a particular input turns out to be insufficient (yield limiting)....
regardless of the macro effect. That translates into a rational economic
reluctance to take a known and somewhat measurable micro-economic risk such
as too little nitrogen where 30% yield loss is not so uncommon. At $2.50
per bushel corn values, that equates to a $30 to $80 per acre shortfall....
If he puts on an extra $10 to $15 of nitrogen (excessive amounts), he
sees that as insuring against a potential $30 to $80 risk... though the
frequency of that "insufficient" nitrogen condition might actually be once
in twenty years... it is human to fear what we can imagine more than a bad
outcome we can already measure... That's the nature of being risk averse.
The majority of corn farmers are human and are therefore, somewhat risk
averse. Add it up in "macro" economic effect and we get lots of corn
farmers pushing the edge of the envelope for one extra incremental bushel
of corn yield. System-wide, that makes for higher CV... even though in a
micro-economic sense it is perceived as yield stabilizing to
Jim Quinton, Risk Management Coordinator
Agricultural Conservation Innovation Center (ACIC)
2234 S. Hobson Ave.
Charleston, SC 29405-2413
phone: (843) 740-1327
fax: (843) 740-1331
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