Stochastic Valuation of Hybrid Rice Technology in Arkansas

Abstract

Despite the rapid producer adoption of hybrid rice (Oryza sativa L.) in recent years, the economic advantage of hybrid rice in the mid-Southern United States remains disputed. This study compares the economic risk and return of three popularly sown hybrid rice varieties: XL723, Clearfield® (CL) XL729, and CL XL745; and eight conventional rice varieties: Cheniere, CL 142-AR, CL 151, Francis, Roy J, Taggart, Templeton, and Wells; using University of Arkansas experimental test plot data from 2006 – 2010. Paddy and milling yield data on each variety are used to estimate a Just-Pope production function, allowing comparison of mean yields and mean yield variances across varieties. A Monte Carlo simulation is used to compare net returns and net return variance (risk) across hybrid and conventional varieties. Just-Pope estimation results indicate that hybrid varieties exhibit mean paddy yield premiums of 1.1 to 1.8 Mg ha-1 relative to the best performing conventional variety (Francis), furthermore the hybrid yield advantage is not associated with increased yield risk. Among hybrid-CL® and conventional-CL®, varieties, hybrid milling quality is not statistically different than conventional varieties. Among non-CL varieties, the hybrid XL723 exhibits a mean head rice yield (HRY) premium relative to conventional alternatives. Monte Carlo simulation results suggest that the net revenue advantage of hybrid-CL and conventional-CL® varieties makes them preferable to and non-CL conventional alternatives, respectively, across the entire range of producer risk preferences considered in this study.