The Effects of Area-based Revenue Protection on Producers’ Choices of Farm-level Revenue Insurance
AbstractProducers’ 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.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149545.
Date of creation: 20 May 2013
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Agricultural Finance; Farm Management;
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-06-04 (Agricultural Economics)
- NEP-ALL-2013-06-04 (All new papers)
- NEP-CMP-2013-06-04 (Computational Economics)
- NEP-IAS-2013-06-04 (Insurance Economics)
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- Dismukes, Robert & Young, C. Edwin, 2008. "New Market Realities Affect Crop Program Choices," Amber Waves, United States Department of Agriculture, Economic Research Service, November.
- 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.
- 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.
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