Advanced Search
MyIDEAS: Login to save this paper or follow this series

Insuring Uncertainty in Value-Added Agriculture: Ethanol Production


Author Info


A wide variety of insurance products is available to agricultural producers to insure against yield or price risks in the markets for the raw commodities they produce. Value-added enterprises, such as ethanol production, have been expanding over the last decade. This paper outlines the development of an insurance product aimed at corn producers who are members of an ethanol production cooperative. The product has the potential to provide these producers with a new and useful risk management tool to insure against price risks in the markets for corn, distillers dried grains with solubles (DDGS), ethanol, and natural gas. Monte Carlo analysis is used to develop fair premiums at various coverage levels. A historical correlation structure is imposed on the simulated price data using a method proposed by Iman and Conover (1982), which maintains the marginal distributions of the variables. Historical analysis is carried out to examine how the product would have performed had it been offered over the last decade. The product is shown to perform as intended, paying indemnities in years of extreme price volatility.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
File Function: Full Text
Download Restriction: no

File URL:
File Function: Online Synopsis
Download Restriction: no

Bibliographic Info

Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 04-wp360.

as in new window
Date of creation: Apr 2004
Date of revision:
Handle: RePEc:ias:cpaper:04-wp360

Contact details of provider:
Postal: 578 Heady Hall, Ames, Iowa 50011-1070
Phone: (515) 294-1183
Fax: (515) 294-6336
Web page:
More information through EDIRC

Related research

Keywords: correlations; ethanol; insurance; risk management; value-added agriculture;


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Kebede, Ellene & Duffy, Patricia A. & Zabawa, Robert, 2006. "The Effect of Ethanol Production on Agricultural Production in the State of Alabama," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35415, Southern Agricultural Economics Association.
  2. Zhu, Jianhua & Jolly, Robert W., 2005. "Dynamic Dividend and Investment Decisions in Value Added Firms: An Application to Farmer Owned Ethanol Plants," Proceedings: 2005 Agricultural and Rural Finance Markets in Transition,October 3-4, 2005; Minneapolis, Minnesota 132765, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:ias:cpaper:04-wp360. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.