A Framework for Economic Analysis of Cropping Systems: Profitability, Risk Management, and Resource Allocation

SUMMARY

A cropping system must be economically viable for it to be sustainable. This study focuses upon the economic components of profitability, risk management potential, and optimal resource allocation. Some of the primary aspects of economic analysis of cropping systems to a broad multidisciplinary audience of researchers, extension specialists, graduate students, and senior undergraduate students are addressed. Analytical economic tools are discussed including data requirements, advantages, and disadvantages of each method. A case study of a Henderson, Kentucky producer is presented as a primary example along with empirical applications from the literature. The importance of various types of economic analysis is demonstrated through the selection of different production decisions dependent on the level of economic analysis included.

KEYWORDS:

• Economics
• sustainable cropping systems
• profitability
• risk management