|ZHANG, RUOJIN - Washington State University|
|MARSH, THOMAS - Washington State University|
|Gent, David - Dave|
Submitted to: Journal of Agricultural Science
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 3/6/2015
Publication Date: 5/31/2015
Citation: Zhang, R., Marsh, T., Gent, D.H. 2015. Risk and maximum residue limits: a study of hops production. Journal of Agricultural Science. 7(5):85-93.
Interpretive Summary: Commodities sold in export markets are subject to regulations on pesticide residue levels that may differ from regulations in country where the commodity was produced. This incongruence may affect choices on pesticide applications to control pests and diseases because growers must balance both yield risk from not controlling a pest and pesticide residue uncertainty that could lead to rejection in an export market. To address these issues we specify an economic model calibrated with data collected from a 2012 survey of hop growers in the Pacific Northwest, and conducted various "what if" scenarios to derive optimal decisions under uncertainty. In general, grower risk preference influences the choice of pesticide use. All else equal, more stringent pesticide residue regulations tend to induce risk averse growers to apply fewer pesticides subject to lower residue limits than do risk neutral growers because of the increasing likelihood of crop rejection. Under specific circumstances, risk preferences coupled with government regulations may tip the decision towards less pesticide use or, alternatively, greater use of other pesticides not subject to export restrictions.
Technical Abstract: This paper examines how maximum residue limits (MRLs) affect the optimal choice by growers of chemical applications to control pests and diseases. In practice, growers who export balance both yield risk and pesticide residue uncertainty when making chemical application decisions. To address these issues we specify an expected utility model and calibrate it to data collected from a 2012 survey of hop growers in the Pacific Northwest. Then we simulate hop grower/exporter decisions subject to MRLs across a myriad of scenarios. As anticipated, risk preferences contribute to explaining higher chemical use. All else equal, more stringent MRLs tend to induce risk averse growers to apply fewer chemicals than do risk neutral growers because of the increasing likelihood of crop rejection due to exceeding an MRL. Under specific circumstances risk preferences coupled with underlying MRLs have the potential to tip the decision towards less chemical uses with potential for more growers implementing integrated pest management strategies or, alternatively, greater use of other pesticides not subject to MRL restrictions.