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Proposed Farm Bill Impact On The Optimal Hedge Ratios For Crops


  • Tran, Trang
  • Coble, Keith H.
  • Harri, Ardian
  • Barnett, Barry J.
  • Riley, John Michael


Revenue insurance with shallow loss protection for farmers has been introduced recently. A common attribute of most shallow loss proposals is that they would be area-revenue triggered. The impact on optimal hedge ratios of combining these shallow loss insurance proposals with deep loss farm-level insurance is examined. Since crop insurance, commodity programs and forward pricing are commonly used concurrently to manage crop revenue risk, the optimal combinations of these tools are explored. Numerical analysis in the presence of yield, basis and futures price variability is used to find the futures hedge ratio which maximizes the certainty equivalent of a risk averse producer. The results generally reveal a lower optimal hedge ratio with area-insurance than with individual insurance and show that STAX and ARC tend to slightly increase optimal hedge ratios.

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  • Tran, Trang & Coble, Keith H. & Harri, Ardian & Barnett, Barry J. & Riley, John Michael, 2013. "Proposed Farm Bill Impact On The Optimal Hedge Ratios For Crops," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143050, Southern Agricultural Economics Association.
  • Handle: RePEc:ags:saea13:143050

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    References listed on IDEAS

    1. Ahearn, Mary Clare, 2009. "Beginning Farmers and Ranchers: Who Are They?," Amber Waves, United States Department of Agriculture, Economic Research Service, June.
    2. Ahearn, Mary Clare & Newton, Doris J., 2009. "Beginning Farmers and Ranchers," Economic Information Bulletin 58618, United States Department of Agriculture, Economic Research Service.
    3. Mishra, Ashok & El-Osta, Hisham, 2007. "Factors Affecting Succession Decisions in Family Farm Businesses: Evidence from a National Survey," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers.
    4. Ashok Mishra & Christine Wilson & Robert Williams, 2009. "Factors affecting financial performance of new and beginning farmers," Agricultural Finance Review, Emerald Group Publishing, vol. 69(2), pages 160-179, July.
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    crop insurance; simulation; hedging; Agricultural Finance; Farm Management; Risk and Uncertainty;

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