Using Portfolio Theory to Enhance Wheat Yield Stability in Low-Income Nations: An Application in the Yaqui Valley of Northwestern Mexico
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This study applies portfolio theory to wheat varietal selection decisions in order to find
risk-minimizing outcomes while holding historical yields constant. Potential correlation
across wheat cultivar yields increases the complexity of cultivar selection decisions, with
gains in one attribute (yield potential) often associated with losses in another (yield
stability). Using location-specific empirical data, portfolio theory can provide producers
in low-income countries a tool for developing a recommended portfolio of varieties given
a desired risk-aversion level. Based on data from Mexico’s Yaqui Valley, results suggest
that sowing a portfolio of wheat varieties could have lowered yield variance by 22% to
33% in Northwest Mexico.