Risk management strategies for producer owned peanut shelling cooperatives
Byrne, Robert James
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Peanut producers have faced several new changes under the past 2002 Farm Bill. Due to these changes, and continual increasing concentration of the peanut industry beyond the farm gate, peanut producers have a lack of market power. Peanut producers can form a New Generation Shelling Cooperative (NGSC) to increase market power and capture some of the value beyond the farm gate. When forming a NGSC, individual farmer-member risks are joined together in the cooperative, thereby increasing an individual farmer’s risk rather than diversifying the farmer’s portfolio. This study identifies various sources of risk, discusses risk management tools, and develops risk management plans for the NGSC. Finally, the risk management plans are tested under a Monte Carlo simulation and measured and ranked with VaR, Sharpe’s Ratio, and a stochastic dominance measure to understand their worth.