Application of Markowitz Portfolio Theory to Producing the World Major Field Crops
DOI:
https://doi.org/10.7160/aol.2020.120409How to Cite
Abstract
Development of growing cereals and oilseeds is a pressing issue for providing global food security and renewable energy. The study deals with applying methods of portfolio theory to mitigate natural and marketing uncertainties emerged from unstable yields and volatile prices for wheat, maize, barley, sunflower, soybeans, and rapeseed. The research outcome based on the utilization of Markowitz mean-variance indicators made possible to evaluate portfolio performances of the world top cereals and oilseeds producers. The study findings at a country level combined econometric forecasting of the crop revenues and modeling optimal portfolios of cereals and oilseeds subject to acceptable trade-offs between risks and expected revenues. The fulfilled calculations with Ukrainian focus clarified farmland allocations under cereal and oilseed crops to underpin biodiversity and keep firm positions in the world markets.References
Arunachalam, R. and Balakrishnan, V. (2012) “Statistical Modeling for Wheat (Triticum Aestivum) Crop Production“, International Journal of Statistics and Applications, Vol. 2, No. 4, pp. 40-46. ISSN 2168-5193, E-ISSN 2168-5215. DOI: https://doi.org/10.5923/j.statistics.20120204.03
Barkley, A. P., Peterson, H. and Shroyer, J. (2010) “Wheat Variety Selection to Maximize Returns and Minimize Risk: An Application of Portfolio Theory”, Journal of Agricultural and Applied Economics, Vol. 42, No. 1, pp. 39-55. ISSN 1074-0708, E-ISSN 2056-7405. DOI: https://doi.org/10.1017/S107407080000328X
Broll, U., Welzel, P. and Wong, K. P. (2013) “Price Risk and Risk Management in Agriculture“, Contemporary Economics, Vol. 7, No. 2, pp. 17-20. ISSN 2084-0845, E-ISSN 2300-8814. DOI: https://doi.org/10.5709/ce.1897-9254.79
Brummer B., Korn O., Schlusler K. and Jaghdani T. J. (2016) “Volatility in oilseeds and vegetable oils markets: Drivers and spillovers“, Journal of Agricultural Economics, Vol. 67, No. 3, pp. 685-705. E-ISSN 1477-9552. DOI: https://doi.org/10.1111/1477-9552.12141
Brussaard, L., Caron P., Campbell, B., Lipper, L., Rabbinge, R., Babin, D. and Pulleman, M. (2010) “Reconciling biodiversity conservation and food security: scientific challenges for a new agriculture“, Current Opinion in Environmental Sustainability, Vol. 2, No. 1-2, pp. 34-42. ISSN 1877-3435. DOI: https://doi.org/10.1016/j.cosust.2010.03.007
Carver, B. F. (2009) “Wheat: Science and Trade“, Hoboken, New Jersey: Wiley-Blackwell, 616 p. ISBN 978-0813820248.
Czyzewski, A. and Smedzik-Ambrozy, K. (2015) “Specialization and diversification of agricultural production in the light of sustainable development“, Journal of International Studies, Vol. 8, No 2, pp. 63-73. ISSN 2071-8330, E-ISSN 2306-3483. DOI: https://doi.org/10.14254/2071-8330.2015/8-2/6
Danforth, A. T. (2011) “Corn Crop Production: Growth, Fertilization and Yield“, Hauppauge, New York: Nova Science Publishers, Inc., 377 p. ISBN 978-1607419556.
Elfson, S. B. (2011) “Barley: Production, Cultivation and Uses“, Hauppauge, New York: Nova Science Publishers, Inc., 341 p. ISBN 978-1612097459.
FAOStat (2020) “Data of the Food and Agriculture Organization of the United Nations“, Statistics, Feb. 2020. [Online]. Available: http://www.fao.org/faostat/en/#data [Accessed: 16 Feb. 2020].
Frison, E. A., Cherfas J. and Hodgkin T. (2011) “Agricultural Biodiversity is Essential for a Sustainable Improvement in Food and Nutrition Security“, Sustainability, Vol. 3, No. 1, pp. 238-253. ISSN 2071-1050. DOI: https://doi.org/10.3390/su3010238
Santeramo F. G. and Lamonaca, E. (2019) “On the drivers of global grain price volatility: an empirical investigation“, Agricultural Economics – Czech, Vol. 65, No. 1, pp. 31-42. ISSN 0139-570X, E-ISSN 1805-9295. DOI: https://doi.org/10.17221/76/2018-AGRICECON
Greene, W. H. (2007) “Econometric analysis“, Upper Saddle River, New Jersey: Pearson Prentice Hall, p. 1216. ISBN 978-0135132456.
Gunstone, F. (2004) “Rapeseed and Canola Oil: Production, Processing, Properties and Uses“, Hoboken, New Jersey: Wiley-Blackwell, p. 240. ISBN 978-1405116251.
Haile, M. G., Kalkuhl, M. and von Braun, J. (2016) “Worldwide acreage and yield response to international price change and volatility: a dynamic panel data analysis for wheat, rice, corn, and soybeans“, American Journal of Agricultural Economics, Vol. 98, No. 1, pp. 172-190. ISSN 0002-9092, E-ISSN 1467-8276. DOI: https://doi.org/10.1093/ajae/aav013
Johnson, L. A., White, P. J. and Galloway, R. (2015) “Soybeans: Chemistry, Production, Processing, and Utilization“, New York City, New York: Academic Press and AOCS Press, 850 p. ISBN 978-1893997646.
Kolm, P. N., Tutuncu, R. and Fabozzi, F. J. (2014) “60 Years of portfolio optimization: Practical challenges and current trends“, European Journal of Operational Research, Vol. 234, No. 2, pp. 356-371. ISSN 0377-2217. DOI: https://doi.org/10.1016/j.ejor.2013.10.060
Lin, B. B. (2011) “Resilience in Agriculture through Crop Diversification: Adaptive Management for Environmental Change“, BioScience, Vol. 61, No. 3, pp. 183-193. ISSN 0006-3568, E-ISSN 1525-3244. DOI: https://doi.org/10.1525/bio.2011.61.3.4
Markowitz, H. M. (2010) “Portfolio Theory: As I Still See It“, Annual Review of Financial Economics, Vol. 2, No. 1, pp. 1-23. E-ISSN 1941-1375. DOI: https://doi.org/10.1146/annurev-financial-011110-134602
Martinez-Force, E., Dunford, N. T. and Salas, J. J. (2015) “Sunflower: Chemistry, Production, Processing, and Utilization“, New York City, New York: Academic Press and AOCS Press, 725 p. ISBN 978-1893997943.
Mumey, G., Burden, B. and Boyda, A. (1992) “Measurement of Farm Risk: Alberta Crop Production“, Canadian Journal of Agricultural Economics, Vol. 40, No. 1, pp. 71-91. E-ISSN 1744-7976. DOI: https://doi.org/10.1111/j.1744-7976.1992.tb03678.x
Prigent, J.-L. (2007) “Portfolio Optimization and Performance Analysis“, London: Chapman and Hall/CRC, p. 456. ISBN 978-1584885788. DOI: https://doi.org/10.1201/9781420010930
Radulescu, M., Radulescu, C. Z. and Zbaganu, G. (2014) “A portfolio theory approach to crop planning under environmental constraints“, Annals of Operations Research, Vol. 219, pp. 243-264. ISSN 0254-5330, E-ISSN 1572-9338. DOI: https://doi.org/10.1007/s10479-011-0902-7
Ramankutty, N., Mehrabi, Z., Waha, K., Jarvis, L., Kremen, C., Herrero, M., and Rieseberg, L. H. (2018) “Trends in Global Agricultural Land Use: Implications for Environmental Health and Food Security“, Annual Review of Plant Biology, Vol. 69, pp. 789-815. E-ISSN 1545-2123. DOI: https://doi.org/10.1146/annurev-arplant-042817-040256
Rude, J. and An, H. (2015) “Explaining grain and oilseed price volatility: The role of export restrictions“, Food Policy, Vol. 57, No. 11, pp. 83-92. ISSN 0306-9192. DOI: https://doi.org/10.1016/j.foodpol.2015.09.002
Santeramo F. G. and Lamonaca E. (2019) “On the drivers of global grain price volatility: an empirical investigation“, Agricultural Economics – Czech, Vol. 65, No. 1, pp. 31-42. ISSN 0139-570X, E-ISSN 1805-9295. DOI: https://doi.org/10.17221/76/2018-AGRICECON
Skrypnyk, A., Tkachuk, V., Andruschenko, V. and Bukin, E. (2018) “Sustainable development facets: farmland and market demand estimation“, Journal of Security and Sustainability Issues, Vol. 7, No. 3, pp. 513-525. ISSN 2029-7017, E-ISSN 2029-7025. DOI: https://doi.org/10.9770/jssi.2018.7.3(11)
State Statistics Service of Ukraine (2020) “Agriculture in Ukraine“. Statistics, Feb. 2020. [Online]. Available: http://www.ukrstat.gov.ua/ [Accessed: 12 Feb. 2020].
Studenmund, A. H. (2016) “Using Econometrics: A Practical Guide“, London: Pearson plc., 576 p. ISBN 978-0134182742.
Toth, M., Holubek, I. and Serences, R. (2016) “Applying Markowitz portfolio theory to measure the systematic risk in agriculture”, in Proceedings of Conference: International Scientific Days 2016. The Agri-Food Value Chain: Challenges for Natural Resources Management and Society, Slovak University of Agriculture in Nitra, pp. 985-993. DOI: https://doi.org/10.15414/isd2016.s12.10
Vasylieva, N. (2013) “Forecasting of prices in the field of crops growing in Ukraine and regions“, Economic Annals-XXI, No. 11-12(2), pp. 26-29. ISSN 1728-6220, E-ISSN 1728-6239.
Vasylieva, N. and Pugach, A. (2017) “Economic assessment of technical maintenance in grain production of Ukrainian agriculture“, Bulgarian Journal of Agricultural Science, Vol. 23, No. 2, pp. 198-203. ISSN 1310-0351, E-ISSN 2534-983X.
Vasylieva, N. (2018) “Ukrainian Agricultural Contribution to the World Food Security: Economic Problems and Prospects“, Montenegrin Journal of Economics, Vol. 14, No. 4, pp. 215-224. ISSN 1800-5845, E-ISSN 1800-6698. DOI: https://doi.org/10.14254/1800-5845/2018.14-4.15
Vasylieva, N. (2019) “Problems and Prospects of Food Security in Ukraine“, Bulgarian Journal of Agricultural Science, Vol. 25, No. 4, pp. 668-676. ISSN 1310-0351, E-ISSN 2534-983X.
Velychko, O., Velychko, L., Butko, O. and Khalatur, S. (2019) “Modelling of strategic managerial decisions in the system of marketing logistics of enterprise“, Innovative Marketing, Vol. 15, No. 2, pp. 58-70. ISSN 1814-2427, E-ISSN 1816-6326. DOI: https://doi.org/10.21511/im.15(2).2019.05
Villanueva, A. B., Halewood, M. and Noriega, I. L. (2017) “Agricultural Biodiversity in Climate Change Adaptation Planning“, European Journal of Sustainable Development, Vol. 6, No. 2, pp. 1-8. ISSN 2239-5938, E-ISSN 2239-6101. DOI: https://doi.org/10.14207/ejsd.2017.v6n2p1
