Quantifying systemic and idiosyncratic risks in agriculture: A study of Kazakhstan's grain production volatility

Abstract

This article aims to propose a method for quantifying the impact of idiosyncratic and systemic risks on agricultural production volatility and to develop techniques and procedures for calculating the number of losses due to systemic risks. The analysis is based on grain yield and price data adjusted for inflation, trends, and acreage in the northern grain-producing region of Kazakhstan from 2005 to 2017. This study presents a method for determining the proportion of systemic and idiosyncratic risk in variations in agricultural production volume. Using a method based on the beta factor can significantly reduce subjectivism and prevent exploitation when assessing and compensating farmers for damages resulting from adverse natural phenomena. The authors believe this is the first study to examine the impact of systemic and idiosyncratic risks on the volatility of production volumes in the grain industry under specific economic conditions in emerging markets.