The Agricultural Risk Management Simulator Microcomputer Program

CONCEPTUAL FOUNDATIONS The Agricultural Risk Management SimProbabilistic budgeting methods are used in ulator (ARMS) is a microcomputer program ARMS to evaluate the impact of alternative designed to help users evaluate strategies for management strategies on annual net cash managing yield and price risk in crop farming flow probability distributions. Probabilistic operations. Risk management strategies are budgeting is a straightforward extension of defined by choices regarding crop mix, the the payoff matrix concept (Nelson, Casler, and purchase of multiple peril crop insurance, and Walker). Net cash flow is calculated for each the use of forward contracting. Probabilistic management strategy being considered in budgeting is used to determine the net cash each of a large number of sample "states of flow probability distribution for each strategy nature" drawn from the joint distribution of considered. Flexibility with regard to both random factors affecting performance. In sources of probabilistic information and the ARMS, a state of nature is defined by yield form of yield and price probability distribuand price levels for each crop enterprise. For tions is a noteworthy feature of the program. each strategy, the budgeted outcomes define the net cash flow distribution.