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Spatial and Temporal On-Farm Risk Management - Crop Production Scheduling and Index Insurance Strategies

  • Lin, Shanshan
  • Mullen, Jeffrey D.
  • Hoogenboom, Gerrit

An agronomic crop growth model, Decision Support System for Agro-Technology Transfer (DSSAT), is used to find optimal crop management strategies for cotton production in Mitchell, Miller, and Lee Counties in Georgia during the past 10 years. Planting date and irrigation threshold are the two variables optimized to maximize farmer's expected utility. A decreasing absolute risk aversion - constant relative risk aversion (DARA-CRRA) utility function is used to examine crop management decision that can be influenced by changes in inter-temporal risk behavior. Comparison is made from management perspective - one is dynamic crop management strategy that varies each year; one is static (constant) strategy over 10 years. Based on the best crop management strategies, index insurance products are designed to help farmers further reduce production risk. The impact of geographical basis risk was assessed by comparing the risk reduction generated from index insurance contracts based on different weather stations; the impact of temporal basis risk is assessed by allowing separate contracts to be purchased for different sub-periods during the entire period.

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File URL: http://purl.umn.edu/49350
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Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49350.

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Date of creation: 2009
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Handle: RePEc:ags:aaea09:49350
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  1. Mario Miranda & Dmitry V. Vedenov, 2001. "Innovations in Agricultural and Natural Disaster Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 650-655.
  2. Olivier Mahul, 2001. "Optimal Insurance Against Climatic Experience," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 593-604.
  3. Skees, Jerry & Gober, Stephanie & Varangis, Panos & Lester, Rodney & Kalavakonda, Vijay, 2001. "Developing rainfall-based index insurance in Morocco," Policy Research Working Paper Series 2577, The World Bank.
  4. Escalante, Cesar L. & Rejesus, Roderick M., 2005. "Farmland Control Decisions under Different Intertemporal Risk Behavioral Constructs," 2005 Annual meeting, July 24-27, Providence, RI 19113, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Richards, Timothy J. & Manfredo, Mark R. & Sanders, Dwight R., 2004. "Pricing Weather Derivatives," Working Papers 28536, Arizona State University, Morrison School of Agribusiness and Resource Management.
  6. Martin, Steven W. & Barnett, Barry J. & Coble, Keith H., 2001. "Developing And Pricing Precipitation Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July.
  7. Schnitkey, Gary D. & Sherrick, Bruce J. & Irwin, Scott H., 2002. "Evaluation of Risk Reductions Associated with Multi-Peril Crop Insurance Products," Proceedings: 2002 Regional Committee NC-221, October 7-8, 2002, Denver, Colorado 132375, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
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