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Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal

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  • Mitchell, Paul D.
  • Knight, Thomas O.

Abstract

A primary change to crop insurance contained in the USDA’s Farm Bill proposal is supplemental deductible coverage (SDC). SDC would allow farmers who purchase individual crop insurance coverage to purchase area-wide coverage in the amount of the individual policy deductible. This supplemental area-wide coverage would be similar to the existing Group Risk Plan policy, but with an accelerated indemnity schedule. Analysis indicates that SDC increases farmer certainty equivalents. The largest benefits are realized by farmers with high yield potential in counties with greater systemic risk. In general, optimal individual policy coverage levels modestly decrease when SDC is taken.

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Bibliographic Info

Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 37 (2008)
Issue (Month): 1 (April)
Pages:

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Handle: RePEc:ags:arerjl:44743

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Web page: http://www.narea.org/
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Related research

Keywords: crop insurance; area-wide coverage; actual production history (APH); group risk plan (GRP); yield distribution; Risk and Uncertainty;

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