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Implications of Commodity Programs and Crop Insurance Policies for Wheat Producers

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  • Luckstead, Jeff
  • Devadoss, Stephen

Abstract

We analyze the effects of Price Loss Coverage (PLC), Agriculture Risk Coverage (ARC), individual revenue protection insurance (RP), and Supplemental Coverage Option (SCO) on the RP coverage level, certainty equivalent, and program payments. The model is calibrated to a representative wheat farm in Mitchell County in Kansas to analyze the effects of various policies. The result highlights that when insurance is framed as an investment, cumulative prospect theory predicts farmers’ coverage decisions accurately at 70%. ARC or PLC program increases the RP coverage level to 75%, but PLC and SCO jointly decrease the RP coverage level to 70%.

Suggested Citation

  • Luckstead, Jeff & Devadoss, Stephen, 2019. "Implications of Commodity Programs and Crop Insurance Policies for Wheat Producers," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 51(2), pages 267-285, May.
    • Handle: RePEc:cup:jagaec:v:51:y:2019:i:02:p:267-285_00
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    Cited by:

    1. Kelly A. Davidson & Brittney K. Goodrich, 2023. "Nudge to insure: Can informational nudges change enrollment decisions in pasture, rangeland, and forage rainfall index insurance?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(1), pages 534-554, March.
    2. Davidson, Kelly A. & Goodrich, Brittney K., 2020. "Nudge to Insure: Can Informational Nudges Increase Enrollment in Pasture, Rangeland and Forage Rainfall Index Insurance?," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304550, Agricultural and Applied Economics Association.
    3. Villacis, Alexis H., 2023. "Inconsistent choices over prospect theory lottery games: Evidence from field experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 103(C).
    4. Bucheli, Janic & Dalhaus, Tobias & Finger, Robert, 2022. "Temperature effects on crop yields in heat index insurance," Food Policy, Elsevier, vol. 107(C).
    5. Tobias Dalhaus & Barry J Barnett & Robert Finger, 2020. "Behavioral weather insurance: Applying cumulative prospect theory to agricultural insurance design under narrow framing," PLOS ONE, Public Library of Science, vol. 15(5), pages 1-25, May.

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