Application and comparison of risk adjusted performance-indicators in the context of pig production

In the recent past, risk and risk management in agriculture has risen on the agenda of farm managers. Amongst other things, the increased interest is inter alia attributed to the Capital Requirements Directives in the ‘Basel II’ agreement. In this article, we apply indicators of risk-adjusted returns, well known in the valuation of equity funds, to the context of pig production. Using a large data set of pig farm performance data, we demonstrate that different indicators of risk-adjusted returns do not necessarily lead to different results in the valuation of farms. We recommend using the Treynor Ratio in practical application. Our empirical analysis did not reveal a significant relationship between returns and risk.