Adjusting Crop Insurance APH Calculation to Accommodate Biomass Production
AbstractThe United States federal government currently subsidizes crop insurance to provide a safety-net to insured farmers. Agricultural economists have debated indirect impacts of the subsidized crop insurance program on producer behavior. One of those debates surrounds the issue of extensiveness, or if crop insurance encourages the production of certain crops for which insurance is more readily available. The federal government is also fostering an emerging cellulosic bioenergy industry with subsidies for planting perennial grass crops like switchgrass and miscanthus. This article analyzes how the current method for calculating actual production history (APH) may deter producers from planting perennial grasses and penalizes those producers who convert some of their row crop land to perennial grasses. An alternative APH calculation method suggested here would continue to provide a safety-net to producers, reduce indemnity payments by insurance companies, and reduce an impediment to planting perennial grasses. The conclusions are based on a utility-maximizing stochastic budgeting model with actual grain yields and FAPRI baseline prices for a representative farm in northeastern Missouri.
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Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 AAEA: Crop Insurance and the Farm Bill Symposium, October 8-9, Louisville, KY with number 156945.
Date of creation: Sep 2013
Date of revision:
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Crop Insurance; Bioenergy; Perennial Grasses; Agricultural and Food Policy; Crop Production/Industries; Resource /Energy Economics and Policy; D81; Q16; Q18; C15;
Find related papers by JEL classification:
- - - - - - -
- Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-10-18 (Agricultural Economics)
- NEP-ALL-2013-10-18 (All new papers)
- NEP-IAS-2013-10-18 (Insurance Economics)
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