ANALYSIS OF THE IMPACT OF FARMERS DECISIONS UNDER RISK ON THE MAIN AGRICULTURAL CROPS IN EGYPT

Abstract

Owing to the variable economic and biophysical environment the agricultural sector is prone to several risks and the most common sources of risk in farming can be classified into two main categories first: Business Risk which is the aggregate effect of the production, market (price), institutional and personal (Human) risk and second one is Financial Risk. These types of risk affect both producers and consumers and influence the farmer’s production decision toward cultivating particular crop. Price volatility has increased, with sharp swings in product and input prices, Markets have been affected by macro -economic disturbances, agricultural policies become more decoupled from production and prices, farmers are now more exposed to market forces than in the past. Based on the above conceptual fact, the study focuses on the role of price risk in shaping farmers' supply-response decisions. The results indicate that producers are more responsive to price factor than non-price factors. It is therefore imperative to reduce price risk as to increase the response of producer to supply by stabilizing the price incentive. Consequently, it is required that the government and the agricultural policies makers stabilizing the price incentive ,this approach will allow the government to achieve stability in production and self –sufficiency ,as well as maintain stable income to the farmers and face the current challenges regarding the price risk volatility. Key Words: Risk, Supply-Response, Production decision, stabilizing price incentive.