Efficient farming options for German apple growers under risk – a stochastic dominance approach

Abstract

For a sustainable economic performance of apple production, the determination of efficient farming options considering production risk is crucial. Relying on a permanent crop, apple producers are less flexible to react upon disturbances. Based on data of 134 apple producers operating in the two main production areas in Germany, we compare and determine efficient production options. Furthermore, appropriate risk management instruments (RMIs) are identified using stochastic dominance criteria. In addition, we use Stochastic Efficiency with Respect to a Function to evaluate farming options for defined ranges of relative risk aversion. The results indicate that Red Prince is the most efficient variety in the north and subsidized hail insurance with frost irrigation is superior to frost irrigation as single RMI. In the south Braeburn should be chosen by rational decision makers, but the tested insurance solutions are not as efficient as the common practice of producing apple under hail nets.