Biomass Contracts for Ethanol Production: The Role of Farmer’s Risk Preferences

This study analyze what contracting terms provides sufficient incentives for farmer’s to enter into a contract to produce energy beets for biofeul production. A stated choice experiment was designed to elicit farmer’s preferences to grow energy beet under alternative contractual arrangements. A latent class rank-ordered logit [LCROL] model is used to empirically analyze the effects of contract attributes, farmer’s risk preferences, and farm characteristics on willingness to adopt energy beet. The results shows that the way the contract mechanism is designed significantly affects farmer’s preference to rank contract alternatives. Few risk perception factors extracted from farmer’s response play a role on the preference of contracts