Farm-level risk management using irrigation and weather derivatives
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This thesis presents an analysis of the role of irrigation in farm-level risk management and the effectiveness of water pricing policies and weather derivatives in reducing water use for corn, cotton, peanut, and tomato productions in Mitchell, Miller, and Lee Counties in Georgia. Water resources in Georgia are under increasing pressure from human activity, highlighting the value of efficient management of irrigation water. It is expected that certain policies can effectively reduce irrigation water use. Two conclusions developed from the findings of this study. First, the optimal irrigation strategy can greatly increase producers Certainty Equivalent Revenue, and recent changes in water pricing policies would only have a limited impact on the amount of water used for crop production in this region. Second, across levels of risk preference, the contracts are found to increase Certainty Equivalent Revenue and reduce accumulative water use when compared to a base scenario without weather derivative contracts.