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Production Risk And Crop Insurance In Malting Barley: A Stochastic Dominance Analysis

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  • Gustafson, Cole R.
  • Wilson, William W.
  • Dahl, Bruce L.

Abstract

Malt barley is an important specialty crop in the Northern Plains and growers mitigate risk with federally subsidized crop insurance and production contracts. However, growers face considerable risk due to "coverage gaps" in crop insurance that result in uncertain indemnity payments due to uncertainty of their crop meeting contract specifications. A stochastic dominance model is developed to evaluate alternative risk efficient strategies for growers with differing risk attitudes and production practices (irrigation vs. dryland). Results show that efficient choices are highly dependent on risk attitudes for dryland growers, but not irrigated growers. Sensitivities with respect to acceptance risk and level of crop insurance subsidization are presented. Increased specialization of agricultural crops with greater emphasis on quality characteristics will limit dryland producer interest in federal crop insurance.

Suggested Citation

  • Gustafson, Cole R. & Wilson, William W. & Dahl, Bruce L., 2006. "Production Risk And Crop Insurance In Malting Barley: A Stochastic Dominance Analysis," 2006 Annual meeting, July 23-26, Long Beach, CA 21095, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea06:21095
    DOI: 10.22004/ag.econ.21095
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    13. Seo, Sangtaek & Mitchell, Paul D. & Leatham, David J., 2005. "Effects of Federal Risk Management Programs on Optimal Acreage Allocation and Nitrogen Use in a Texas Cotton-Sorghum System," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 37(3), pages 1-15, December.
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    1. Ripplinger, David & Saxowsky, David M. & Bangsund, Dean A., 2014. "Economic Feasibility of Irrigation Along the McClusky Canal in North Dakota: Farm-level Returns," Agribusiness & Applied Economics Report 196960, North Dakota State University, Department of Agribusiness and Applied Economics.
    2. Turvey, Calum G., 2010. "Whole Farm Income Insurance in a Canadian Context," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61732, Agricultural and Applied Economics Association.

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