Do Farmers Really Plant Apples for Their Income and Cherries for Their Retirement? The Effects of Risk, Scope and Scale on Orchard Land Allocation

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Zhao, Xin ; Brady, Michael P. ; Tozer, Peter R. (2015)
  • Subject: Acreage, Crop Diversification, Economies of Scope, Orchard Crop, Risk, Crop Production/Industries, Farm Management, Land Economics/Use, Risk and Uncertainty, Q12, Q15,

Most fruit growers in Central Washington that produce apples or cherries typically grow both. This is interesting given that important sources of complementarities which generate economies of scope, such as crop rotations, that motivate crop diversification throughout agriculture are not present. An alternative explanation is risk mitigation because apple and cherry yields and prices are somewhat uncorrelated. In this paper we attempt to evaluate the relative importance of economies of scope versus risk in motivating orchard crop diversification while accounting for economies of scale. To date, the literature on perennial crop supply response has not considered diversification and thus may be missing an important factor that determines farm level land allocation decisions which influence aggregate supply response.
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