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Crop Insurance and Pre-harvest Pricing of Corn and Soybeans: Case Studies for Selected States and Farms

Author

Listed:
  • Wisner, Robert N.
  • Blue, E. Neal
  • Baldwin, E. Dean
  • Jr., G. Art Barnaby

Abstract

To test the effectiveness in managing net income risk and profit levels, pre-harvest corn and soybean options-based pricing strategies and crop yield and revenue insurance products were modeled for case study farms in three states. These combinations reduced income variability while increasing net incomes relative to harvest cash marketings. Adding crop insurance to pre-harvest pricing strategies reduced net incomes from those with pre-harvest pricing alone, but produced larger incomes than uninsured harvest sales. The Ohio model farm was modified to reflect (1) a debt-free operation, (2) a cash renter, and (3) a buyer-renter operation. No strategy was able to cover opportunity costs on investments for types (1) and (3). Both crop insurance and pre-harvest strategies are effective tools especially for highly leveraged farms.

Suggested Citation

Handle: RePEc:ags:nc8191:285732
DOI: 10.22004/ag.econ.285732
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