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Revenue Protection for Organic Producers: Too Much or Too Little

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  • Singerman, Ariel
  • Hart, Chad E.
  • Lence, Sergio H.

Abstract

A framework is developed to examine organic crop insurance established by the Risk Management Agency (RMA). Given that RMA links organic and conventional crop prices, the model is calibrated to reflect both markets to illustrate the impacts that pricing has on insurance coverage. Findings indicate that at the 75% coverage level, RMA's fixed price factor implies an effective coverage ranging from 45% to 106% depending on the ratio of planting-time organic to conventional market prices. Results suggest RMA's program is likely to induce adverse selection, because the nominal coverage level is likely to substantially deviate from the effective coverage.

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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124370.

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Date of creation: 2012
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Handle: RePEc:ags:aaea12:124370

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Keywords: crop insurance; organic agriculture; Agricultural and Food Policy; Q18;

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  1. Chad E. Hart & Dermot J. Hayes & Bruce A. Babcock, 2003. "Insuring Eggs in Baskets," Center for Agricultural and Rural Development (CARD) Publications 03-wp339, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. Loureiro, Maria L. & McCluskey, Jill J. & Mittelhammer, Ronald C., 2001. "Assessing Consumer Preferences For Organic, Eco-Labeled, And Regular Apples," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(02), December.
  3. Bruce A. Babcock & Joseph A. Herriges, 1994. "Input Demand Under Yield and Revenue Insurance," Center for Agricultural and Rural Development (CARD) Publications 94-wp127, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  4. Sergio H. Lence & Dermot J. Hayes, 2000. "U.S. Farm Policy and the Variability of Commodity Prices and Farm Revenues," Food and Agricultural Policy Research Institute (FAPRI) Publications 00-wp239, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  5. Wright, Brian D, 1979. "The Effects of Ideal Production Stabilization: A Welfare Analysis Under Rational Behavior," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1011-33, October.
  6. Sergio H. Lence & Dermot J. Hayes, 2005. "Genetically Modified Crops: Their Market and Welfare Impacts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 931-950.
  7. Keith H. Coble & Thomas O. Knight & Rulon D. Pope & Jeffery R. Williams, 1996. "Modeling Farm-Level Crop Insurance Demand with Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 439-447.
  8. McBride, William D. & Greene, Catherine R., 2008. "The Profitability of Organic Soybean Production," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6449, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service.
  10. Williams,Jeffrey C. & Wright,Brian D., 1991. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521326162, December.
  11. Babcock, Bruce A. & Blackmer, A. M., 1992. "Value of Reducing Temporal Input Nonuniformities (The)," Staff General Research Papers 10587, Iowa State University, Department of Economics.
  12. Nicolai V. Kuminoff & Ada Wossink, 2010. "Why Isn't More US Farmland Organic?," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 240-258.
  13. Singerman, Ariel & Lence, Sergio H. & Kimble-Evans, Amanda, 2010. "Organic Crop Prices, or 2x Conventional Ones?," Staff General Research Papers 31544, Iowa State University, Department of Economics.
  14. Paulson, Nicholas D. & Babcock, Bruce A., 2007. "Get a GRIP: Should Area Revenue Coverage be Offered through the Farm Bill or as a Crop Insurance Program?," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9842, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  15. Singerman, Ariel & Hart, Chad E. & Lence, Sergio H., 2010. "Demand for Crop Insurance by Organic Corn and Soybean Farmers in Three Major Producing States," Staff General Research Papers 31528, Iowa State University, Department of Economics.
  16. Babcock, Bruce A. & Blackmer, Alfred M., 1992. "The Value Of Reducing Temporal Input Nonuniformities," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(02), December.
  17. Klonsky, Karen & Greene, Catherine R., 2005. "Widespread Adoption of Organic Agriculture in the US: Are Market-Driven Policies Enough?," 2005 Annual meeting, July 24-27, Providence, RI 19382, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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