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The Effect of Deficiency Payments on the Risk-return Relationship of Louisiana Cotton Farms

Gary A. Kennedy, Steven A. Henning, Lonnie R. Vandeveer and Hector O. Zapata


Stability in net farm income resulting from direct government deficiency payments has historically affected the optimum crop mix combination that results in risk-efficient portfolios. This paper illustrates the degree to which cotton deficiency payments affect the risk-return relationship for optimal production mixes of cotton and soybeans for a representative farm in each of Louisiana's three cotton production areas. Results suggest that the impact of the decline and eventual elimination of cotton deficiency payments on the risk-return relationship of Louisiana cotton producers will vary by cotton production region within the state.

Reprinted from Proceedings of the 1998 Beltwide Cotton Conferences pp. 303 - 306
©National Cotton Council, Memphis TN

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Document last modified Sunday, Dec 6 1998