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Evaluation Of Hedging In The Presence Of Crop Insurance And Government Loan Programs

Author

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  • Zuniga, Manuel
  • Coble, Keith H.
  • Heifner, Richard G.

Abstract

This research evaluates the interaction of new alternative insurance designs, forward pricing tools and the government revenue protection program while assuming a government loan program is in place. A numerical analysis is conducted using a revenue simulation model that incorporates futures prices, basis, and yield variability. Three crop insurance designs at 75 percent of yield guarantee are evaluated. Optimal futures and at-the-money put option hedge ratios are derived for expected utility maximizing of soybean producers. Sensitivity to loan rate levels are examined. Our results suggest that loan programs profoundly alter the optimal producer strategy.

Suggested Citation

  • Zuniga, Manuel & Coble, Keith H. & Heifner, Richard G., 2001. "Evaluation Of Hedging In The Presence Of Crop Insurance And Government Loan Programs," 2001 Conference, April 23-24, 2001, St. Louis, Missouri 18965, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:ncrone:18965
    DOI: 10.22004/ag.econ.18965
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    Cited by:

    1. Barham, E. Hart Bise & Robinson, John R.C. & Richardson, James W. & Rister, M. Edward, 2011. "Mitigating Cotton Revenue Risk Through Irrigation, Insurance, and Hedging," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 43(4), pages 1-12, November.
    2. Ardian Harri & John Michael Riley & John D. Anderson & Keith H. Coble, 2009. "Managing economic risk in value‐based marketing of fed cattle," Agricultural Economics, International Association of Agricultural Economists, vol. 40(3), pages 295-306, May.
    3. Lewis T. Cunningham & B. Wade Brorsen & Kim B. Anderson & Emílio Tostão, 2008. "Gender differences in marketing styles," Agricultural Economics, International Association of Agricultural Economists, vol. 38(1), pages 1-7, January.
    4. Bégué-Turon, Jean-Loïc & Perraudeau, Yves & Rautureau, Nicolas, 2006. "The potential use of derivatives to manage the price risk of seafood markets: the case of sole and cuttlefish in France," MPRA Paper 841, University Library of Munich, Germany.

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    Keywords

    Agricultural Finance; Marketing;

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