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The Effects of Area-based Revenue Protection on Producers’ Choices of Farm-level Revenue Insurance

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  • Dismukes, Robert
  • Coble, Keith H.
  • Miller, Corey
  • O'Donoghue, Erik J.

Abstract

Producers’ increased reliance on crop insurance has led to concerns about losses producers could incur that are not covered by crop insurance. In the current farm bill debate, several proposals that would be based on area (county) revenue and are intended to cover a portion of producers’ crop insurance deductibles, referred to as “shallow loss” programs, have been advanced. We analyze, using an empirically-based simulation model and a certainty equivalent criterion, how shallow loss coverages might affect optimal coverage levels of farm-level revenue insurance for a moderately risk-averse producer. Our analysis suggests that area-based revenue insurance designs have some potential for causing producers to reduce coverage levels for farm-level revenue insurance, though the marginal differences in the certainty equivalents are often relatively small on a percentage basis.

Suggested Citation

  • Dismukes, Robert & Coble, Keith H. & Miller, Corey & O'Donoghue, Erik J., 2013. "The Effects of Area-based Revenue Protection on Producers’ Choices of Farm-level Revenue Insurance," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149545, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea13:149545
    DOI: 10.22004/ag.econ.149545
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    References listed on IDEAS

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    1. Dismukes, Robert & Young, C. Edwin, 2008. "New Market Realities Affect Crop Program Choices," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-8, November.
    2. Barry J. Barnett & Keith H. Coble, 2012. "Understanding Regional Differences in Farm Policy Preferences," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 528-534.
    3. Dismukes, Robert & Arriola, Christine & Coble, Keith H., 2010. "ACRE Program Payments and Risk Reduction: An Analysis Based on Simulations of Crop Revenue Variability," Economic Research Report 262248, United States Department of Agriculture, Economic Research Service.
    4. Cooper, Joseph C. & Delbecq, Benoit A. & Davis, Christopher G., 2012. "Fiscal and Farm Level Consequences of “Shallow Loss” Commodity Support," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124199, Agricultural and Applied Economics Association.
    5. Mario J. Miranda, 1991. "Area-Yield Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 233-242.
    6. Paulson, Nick, 2012. "Understanding the Supplemental Coverage Option," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 2, June.
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    Cited by:

    1. Luckstead, Jeff & Devadoss, Stephen, 2016. "Implication of 2014 Farm Policies for Wheat Production," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235362, Agricultural and Applied Economics Association.
    2. Xiaofei Li & Zhiwei Shen & Ardian Harri & Keith H. Coble, 2020. "Comparing survey-based and programme-based yield data: implications for the U.S. Agricultural Risk Coverage-County programme," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 184-202, January.
    3. Luitel, Kishor P. & Hudson, Darren & Knight, Thomas O., 2015. "Understanding Cotton Producer’s Crop Insurance Choices Under the 2014 Farm Bill," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205438, Agricultural and Applied Economics Association.
    4. Lauriane Yehouenou & Barry J Barnett & Ardian Harri & Keith H Coble, 2018. "STAX Appeal?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 40(4), pages 563-584, December.
    5. Yehouenou, Lauriane S. M. & Barnett, Barry J. & Harri, Ardian & Coble, Keith H., 2016. "An Analysis of Factors Affecting Bias and Inefficiency in Area Yield Indexes Based on Aggregated Farm Yields," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230081, Southern Agricultural Economics Association.

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    Keywords

    Agricultural Finance; Farm Management;

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