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Climate Information for Managing Risk through Agricultural Land and Machinery Contractual Arrangements

Progress Report 2004-2005

Principle Investigator

Peter J. Lamb, University of Oklahoma

Co-Investigators

James W. Mjelde (Subcontract Principal Investigator, Department of Agricultural Economics, Texas A&M University)
Danny A. Klinefelter (Department of Agricultural Economics, Texas A&M University)
Michael B. Richman (School of Meteorology, the University of Oklahoma)

A potential mechanism to manage the adverse and beneficial effects of climate variability on agricultural production through "adaptation" is use of innovative contractual arrangements for capital investments (land and machinery) throughout the U.S. and elsewhere. This opportunity arose from informal discussions with members of the Association of Agricultural Production Executives (AAPEX), a 500-member group whose national and international operations produce 2.5 percent of the total U.S. agricultural output. Here, we will examine the potential for application of knowledge of regional climate variability obtained from analyses of historical data to resource allocation decisions for land and machinery to manage risk in unique contractual arrangements between various regions in the U.S. and other regions worldwide. Consistent with the HDGCR's Program Announcement Sheet FY 2004, "the results of this research should be able to provide decision makers within the regions under study information and/or tools to further existing strategies."

The methodology proposed to address the above issues consists of several related general steps. First, focus group meetings of crop producers will be conducted to define the issues more fully. Second, the output of these meetings will be used to design the needed economic model building and climate-agriculture analyses. Third, results from the first and second steps will be presented to reconvened focus groups for feedback concerning the initial model development and analyses. Next, based on the feedback, revisions to the modeling effort and climate-agriculture analyses will be undertaken. Finally, the modeling and analyses will be completed and results and decision-aids will be disseminated. Although written here as distinct steps, interactions with crop producers and ranchers will not be limited to the focus group meetings. Less formal interactions with crop producers are anticipated to occur throughout the study.

This approach involves strong integration of physical and social science research. It capitalizes on our near 20-year record of collaborative experience that spans all areas of proposed activity ñ focus group use, climate-agriculture analysis, economic model building and application, development of decision-aid tools and materials, and dissemination of such tools and materials to agricultural producers.