IDEAS home Printed from https://ideas.repec.org/p/ags/aaea14/170188.html
   My bibliography  Save this paper

Contracting in the Presence of Insurance: The Case of Bioenergy Crop Production

Author

Listed:
  • Yang, Xi
  • Miao, Ruiqing
  • Khanna, Madhu

Abstract

This paper investigates the interaction of crop insurance and contracts in improving the risk management of farmers who produce bioenergy crops. Numerical simulation is conducted for 1,919 U.S. counties east of the 100th Meridian that have yield data for corn and for at least one bioenergy crop yield of miscanthus and switchgrass. County-level yield data, both on low quality land and high quality land, are simulated by using DayCent model, and Copula approach is used to estimate a joint yield-price distribution for each county. We model a representative farmers’ optimal choice problem of whether to use their land to grow conventional crops or to use their land for production of bioenergy crops under one of three different contract choices offered by the biorefinery. The terms of these contracts are determined in such a manner that they jointly maximize the net benefits of the refinery and farmers. We do this joint optimization in two scenarios: ‘With insurance’ and ‘Without insurance’ for bioenergy crops to see how presence of crop insurance for bioenergy crops will affect the optimal contract design and will affect land allocation under a certain contract type.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Yang, Xi & Miao, Ruiqing & Khanna, Madhu, 2014. "Contracting in the Presence of Insurance: The Case of Bioenergy Crop Production," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170188, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea14:170188
    DOI: 10.22004/ag.econ.170188
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/170188/files/Contracting_Insurance_2014AAEA.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.170188?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sartwelle, James D., III & O'Brien, Daniel M. & Tierney, William I., Jr. & Eggers, Tim, 2000. "The Effect Of Personal And Farm Characteristics Upon Grain Marketing Practices," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(1), pages 1-17, April.
    2. Paulson Nicholas D & Katchova Ani L & Lence Sergio H, 2010. "An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 8(1), pages 1-25, May.
    3. Barry K. Goodwin & Ted C. Schroeder, 1994. "Human Capital, Producer Education Programs, and the Adoption of Forward-Pricing Methods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(4), pages 936-947.
    4. Olivier Mahul & Brian Davern Wright, 2003. "Designing optimal crop revenue insurance," Post-Print hal-01954721, HAL.
    5. Sartwelle, James & O'Brien, Daniel & Tierney, William & Eggers, Tim, 2000. "The Effect of Personal and Farm Characteristics upon Grain Marketing Practices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 32(1), pages 95-111, April.
    6. Velandia, Margarita & Rejesus, Roderick M. & Knight, Thomas O. & Sherrick, Bruce J., 2009. "Factors Affecting Farmers' Utilization of Agricultural Risk Management Tools: The Case of Crop Insurance, Forward Contracting, and Spreading Sales," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 41(1), pages 107-123, April.
    7. Coble, Keith H. & Heifner, Richard G. & Zuniga, Manuel, 2000. "Implications Of Crop Yield And Revenue Insurance For Producer Hedging," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(2), pages 1-21, December.
    8. Keith H. Coble, 2004. "The joint effect of government crop insurance and loan programmes on the demand for futures hedging," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 31(3), pages 309-330, September.
    9. Yang, Xi & Paulson, Nicholas D. & Khanna, Madhu, 2012. "Optimal Contracts to Induce Biomass Production under Risk," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124699, Agricultural and Applied Economics Association.
    10. Paulson Nicholas D & Katchova Ani L & Lence Sergio H, 2010. "An Empirical Analysis of the Determinants of Marketing Contract Structures for Corn and Soybeans," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 8(1), pages 1-25, May.
    11. B.I. Shapiro & B. Wade Brorsen, 1988. "Factors Affecting Farmers' Hedging Decisions," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 145-153.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Caroline Roussy & Aude Ridier & Karim Chaib & Marie Boyet, 2018. "Marketing contracts and risk management for cereal producers," Agribusiness, John Wiley & Sons, Ltd., vol. 34(3), pages 616-630, June.
    2. Bignebat, C., 2018. "Learning process in marketing contract choice: the case of cereals in the Paris Basin," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277233, International Association of Agricultural Economists.
    3. Feil, J.-H. & Anastassiadis, F. & Mußhoff, O. & Schilling, P., 2015. "Analysing Farmers’ Use of Price Hedging Instruments: An Experimental Approach," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 50, March.
    4. Mofokeng, Maine & Vink, Nick, 2013. "Factors Affecting the Hedging Decision of Maize Farmers in Gauteng Province," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161465, African Association of Agricultural Economists (AAAE).
    5. Frasa, Stefanie & Carlberg, Jared & Hogan, Robert, 2015. "Use of Contracts by Prairie Agricultural Producers," Working Papers 232328, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    6. Roussy, Caroline & Rider, Aude & Chaib, Karim & Boyet, Marie, 2017. "Marketing Contracts and Risk Management for Cereal Producers," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261106, European Association of Agricultural Economists.
    7. Vassalos, Michael & Li, Yingbo, 2016. "Assessing the Impact of Fresh Vegetable Growers’ Risk Aversion Levels and Risk Preferences on the Probability of Adopting Marketing Contracts: A Bayesian Approach," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 19(1), pages 1-18, February.
    8. Carrer, Marcelo José & Silveira, Rodrigo Lanna F. & Meirelles De Souza Filho, Hildo, 2017. "Citrus Producers' Choice of Price Risk Management Tools," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258352, Agricultural and Applied Economics Association.
    9. Vassalos, Michael & Li, Yingbo, 2014. "Assessing the Impact of Fresh Vegetable Growers’ Risk Aversion Levels and Risk Perception on the Probability of Adopting Marketing Contracts: A Bayesian Approach," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170233, Agricultural and Applied Economics Association.
    10. Jensen, Kimberly L. & English, Burton C. & Clark, Christopher D. & Menard, R. Jamey, 2011. "Preferences for Marketing Arrangements by Potential Switchgrass Growers," Journal of Cooperatives, NCERA-210, vol. 25, pages 1-28.
    11. Katchova, Ani L., 2013. "Agricultural Contracting and Agrifood Competition," Staff Papers 164515, University of Kentucky, Department of Agricultural Economics.
    12. Williams, John & Malcolm, Bill, 2012. "Farmer decisions about selling wheat and managing wheat price risk in Australia," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 20, pages 1-10.
    13. Jordaan, Henry & Grove, Bennie, 2007. "Factors Affecting Maize Producers Adoption of Forward Pricing in Price Risk Management: The Case of Vaalharts," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(4), pages 1-18, December.
    14. Aymeric Ricome & Arnaud Reynaud, 2022. "Marketing contract choices in agriculture: The role of price expectation and price risk management," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 170-186, January.
    15. Jordaan, Henry & Grove, Bennie, 2008. "Factors affecting the use of forward pricing methods in price risk management with special reference to the influence of risk aversion," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), pages 1-14, March.
    16. Ueckermann, E.M. & Blignaut, J.N. & Gupta, Rangan & Raubenheimer, J., 2008. "Modelling South African grain farmers’ preferences to adopt derivative contracts using discrete choice models," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(2), pages 1-18, June.
    17. Jason R.V. Franken & Joost M.E. Pennings & Philip Garcia, 2014. "Measuring the effect of risk attitude on marketing behavior," Agricultural Economics, International Association of Agricultural Economists, vol. 45(5), pages 525-535, September.
    18. Ma, Wanglin & Abdulai, Awudu, 2015. "Linking apple farmers to markets: Determinants and impacts of marketing contracts in China," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 202719, Agricultural and Applied Economics Association.
    19. Elisabeth Vollmer & Daniel Hermann & Oliver Musshoff, 2019. "The disposition effect in farmers’ selling behavior: an experimental investigation," Agricultural Economics, International Association of Agricultural Economists, vol. 50(2), pages 177-189, March.
    20. Jacobs, Keri & Li, Ziran & Hayes, Dermot, 2016. "Price Responses in Forward Contracting: Do We Limit The Upside And Expose The Downside?," ISU General Staff Papers 201601010800001017, Iowa State University, Department of Economics.

    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea14:170188. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.