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Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA’s 2007 Farm Bill Proposal

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  • Mitchell, Paul D.
  • Knight, Thomas O.

Abstract

A primary change to crop insurance contained in the USDA's Farm Bill Proposal is Supplemental Deductible Coverage (SDC). SDC would allow farmers who purchase individual crop insurance coverage to purchase GRP in the amount of the individual policy deductible. GRP indemnities would be accelerated compared with the current GRP policy. Analysis indicates that SDC provides substantial benefits in terms of certainty equivalent gains. The largest benefits are realized by low risk farmers, compared to others in the county, and farmers whose yields are highly correlated with the county yield. Optimal individual policy coverage levels generally decrease when SDC is taken.

Suggested Citation

  • Mitchell, Paul D. & Knight, Thomas O., 2007. "Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA’s 2007 Farm Bill Proposal," Staff Papers 92125, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    • Handle: RePEc:ags:wisagr:92125
    DOI: 10.22004/ag.econ.92125
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    References listed on IDEAS

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