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Are U.S. Corn and Soybeans Becoming More Drought Tolerant?

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Listed:
  • Tian Yu
  • Bruce A. Babcock

Abstract

An objective drought index that measures the dry and hot conditions adversely affecting crop yields is used in a regression analysis to test whether corn and soybeans have become more drought tolerant. Results indicate that corn yield losses, whether measured in quantity terms or as a percentage of mean yield, have decreased. The null hypothesis that the absolute level of soybean yield losses due to drought has not changed cannot be rejected. But yield losses in percentage terms have decreased over time. Because drought is the primary cause of yield loss in the U.S. crop insurance program and because U.S. crop insurance rates assume that percentage of yield losses are constant over time, these results indicate that U.S. crop insurance rates in the Corn Belt are too high.

Suggested Citation

  • Tian Yu & Bruce A. Babcock, 2009. "Are U.S. Corn and Soybeans Becoming More Drought Tolerant?," Center for Agricultural and Rural Development (CARD) Publications 09-wp500, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:09-wp500
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    References listed on IDEAS

    as
    1. Daniel O'Brien & Marvin Hayenga & Bruce Babcock, 1996. "Deriving Forecast Probability Distributions of Harvest-Time Corn Futures Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 18(2), pages 167-180.
    2. Jerry R. Skees & J. Roy Black & Barry J. Barnett, 1997. "Designing and Rating an Area Yield Crop Insurance Contract," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 430-438.
    3. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-434, November.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    corn; crop insurance rates; drought tolerance; soybean; yield risk;
    All these keywords.

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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