MODELING PROFITABILITY AND RISK IN WHEAT PRODUCTION: A MONTE CARLO APPROACH

Having in mind an importance of wheat production for Serbian agriculture, it is necessary to explore its level of riskiness and profitability. The goal of this research was to discuss these topics based on data describing variability of key influential components, such as market price and yield of wheat. Based on relevant statistical data for Province of Vojvodina (covering period from 2010 to 2024) log-normal distribution was applied to model wheat price and yield changes. Monte Carlo simulation was performed to determine profitability and risk in wheat production. It was concluded that expected median profit and mean profit in wheat production have negative values. The risk in wheat production proves to be very high, i.e., there is 96.8% probability of achieving negative outcome (producers would suffer losses). The result proved that Monte Carlo simulation performed well, although actual loss was smaller than loss estimated by the simulation.

KEYWORDS / KLJUČNE REČI: 

Wheat production, profit, risk, log-normal distribution, Monte Carlo simulation

ACKNOWLEDGEMENT / PROJEKAT:

This paper is a result of the research funded by the Ministry of Science, Technological Development and Innovations of the Republic of Serbia based on the agreement between the Ministry and the Faculty of Agriculture, University of Belgrade (Contract no. 451- 03-137/2025-03/200116) on the realization and financing of scientific research in 2023.

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