Price and production risk are very important issues to take into consideration in agriculture. Price risk is given by changes in supply and demand in the world market, but since producers usually have to take the price given by the markets, i.e. price takers, they do not have much control over it. Production risk on the other hand is given by changes in production due mainly to weather, pest control, crop mix, variety mix, and inputs. Besides weather and insect pest, most of the time producers have complete control on the other variables. Good management over these production variables is key to remain competitive.

Cotton variety trials are conducted yearly to monitor the characteristics of newly developed cotton varieties. These tests include cultivars submitted by seed companies and are typically conducted by state agricultural experiment stations. These trials provide producers useful information on the performance of different cultivars recording yield, turn out, quality, production practices, etc. All this information helps manage some of the production risk by choosing the variety that performs best for the region in terms of yield and quality. However, it is important to consider results from several years since results may vary between years.

The objective of this study is to compare the net income of different cotton cultivars grown in the Lower Rio Grande Valley, Texas using simulation techniques to incorporate yield and price risk. Moreover, portfolio analysis techniques will be used to show how price and production risk could be reduced using a portfolio of varieties.