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Comparative Analysis of Producer Welfare Benefits of Yield Substitution and Yield Exclusion

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  • Adhikari, Shyam
  • Luitel, Kishor

Abstract

Farm Bill 2014 introduced yield exclusion option to exclude the catastrophic year yield from APH yield to mitigate its impact on lowering the insurance guarantee. With high prevalence of yield substitution for the low yield; yield exclusion offers another option for producers to choose to enhance their welfare. We take the case of two crops and counties with different risk profile and conducted a comparative analysis on welfare gain by these two options for yield and revenue protection insurance. Our analysis suggests that the yield exclusion provides the higher welfare gain to the producer and likely to replace yield substitution. However, yield substitution is still a valid option when yield exclusion does not change the effective coverage level enormously.

Suggested Citation

  • Adhikari, Shyam & Luitel, Kishor, 2016. "Comparative Analysis of Producer Welfare Benefits of Yield Substitution and Yield Exclusion," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235567, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235567
    DOI: 10.22004/ag.econ.235567
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    1. Adhikari, Shyam & Knight, Thomas O. & Belasco, Eric J., 2013. "Yield Guarantees and the Producer Welfare Benefits of Crop Insurance," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(1), pages 1-15, April.
    2. Anderson, John D. & Harri, Ardian & Coble, Keith H., 2009. "Techniques for Multivariate Simulation from Mixed Marginal Distributions with Application to Whole-Farm Revenue Simulation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(1), pages 1-15, April.
    3. Chavas, Jean-Paul, 2004. "Risk Analysis in Theory and Practice," Elsevier Monographs, Elsevier, edition 1, number 9780121706210.
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