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Revenue Protection for Organic Producers: Too Much or Too Little

Author

Listed:
  • Singerman, Ariel
  • Hart, Chad E.
  • Lence, Sergio H.

Abstract

A framework is developed to examine the 2011 pilot program established by the Risk Management Agency (RMA) to insure organic crops. Given that for insurance purposes RMA links organic crop prices to their conventional counterparts by a fixed percentage, we calibrate our model to reflect the organic and conventional corn markets to illustrate the impacts that such pricing potentially has on Revenue Protection coverage under different scenarios. Findings indicate that at the 75% nominal coverage level, RMA's fixed price factor implies an effective coverage ranging from 45 to 106% depending on what the organic to conventional market price ratio is; resulting, therefore, in lower and higher indemnities compared to those organic producers should get when considering their idiosyncratic revenue distribution.

Suggested Citation

  • Singerman, Ariel & Hart, Chad E. & Lence, Sergio H., 2011. "Revenue Protection for Organic Producers: Too Much or Too Little," Staff General Research Papers Archive 33912, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:33912
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    1. Sergio H. Lence & Dermot J. Hayes, 2005. "Genetically Modified Crops: Their Market and Welfare Impacts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 931-950.
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    4. Singerman, Ariel & Hart, Chad E. & Lence, Sergio H., 2010. "Demand for Crop Insurance by Organic Corn and Soybean Farmers in Three Major Producing States," Staff General Research Papers Archive 31528, Iowa State University, Department of Economics.
    5. Babcock, Bruce A. & Blackmer, A. M., 1992. "Value of Reducing Temporal Input Nonuniformities (The)," Staff General Research Papers Archive 10587, Iowa State University, Department of Economics.
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    Cited by:

    1. Delbridge, Timothy A. & King, Robert P., 2016. "How Important is the T-Yield? An Analysis of Reforms to Organic Crop Insurance," Staff Papers 244732, University of Minnesota, Department of Applied Economics.
    2. F. G. Santeramo & B. K. Goodwin & F. Adinolfi & F. Capitanio, 2016. "Farmer Participation, Entry and Exit Decisions in the Italian Crop Insurance Programme," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 639-657, September.

    More about this item

    Keywords

    crop insurance; organic production; revenue protection;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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