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Implications of Crop Insurance for Farmers and Lenders

Author

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  • Leatham, David J.
  • McCarl, Bruce A.
  • Richardson, James W.

Abstract

The effect of the farmer's choice of crop insurance was evaluated on both the farmer's and lender's performance. This was done using whole-farm, Monte Carlo simulation for Texas wheat/sorghum operations. Results indicate crop insurance would be preferred by moderately risk-averse farmers when farm firm failure became an issue or the insurance loss ratio approached one. A lender always preferred the use of crop insurance, especially when the probability of firm bankruptcy was an issue.

Suggested Citation

  • Leatham, David J. & McCarl, Bruce A. & Richardson, James W., 1987. "Implications of Crop Insurance for Farmers and Lenders," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(2), pages 113-120, December.
    • Handle: RePEc:cup:jagaec:v:19:y:1987:i:02:p:113-120_02
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    Cited by:

    1. Williams, Jeffery R. & Carriker, Gordon L. & Barnaby, G. Art & Harper, Jayson K. & Black, J. Roy, "undated". "Area-Measured Crop Insurance And Disaster Aid For Wheat And Grain Sorghum," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271256, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Edelman, Mark A. & Schmiesing, Brian H. & Khajasteh, Khosrow, "undated". "Effects of Disaster Assistance on Multiple Peril Crop Insurance Purchases by Iowa Crop Farmers," 1990 Annual meeting, August 5-8, Vancouver, Canada 271048, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Olsen, Douglas Ray, 1990. "An analysis of the use of farm marketing and crop insurance risk transfer tools by Iowa farm characteristics," ISU General Staff Papers 1990010108000018157, Iowa State University, Department of Economics.
    4. Seo, Sangtaek & Leatham, David J. & Mitchell, Paul D., 2003. "Risk Sharing and Incentives with Crop Insurance and External Equity Financing," 2003 Regional Committee NCT-194, October 6-7, 2003; Kansas City, Missouri 132523, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    5. Seo, Sangtaek & Mitchell, Paul D. & Leatham, David J., 2008. "Risk Sharing and Incentives with External Equity Financing and Crop Insurance," Staff Papers 92204, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.

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