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Revenue Protection for Organic Producers: Too Much or Too Little

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

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.

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File URL: http://www2.econ.iastate.edu/papers/p13912-2011-06-22.pdf
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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers Archive with number 33912.

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Date of creation: 22 Jun 2011
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Handle: RePEc:isu:genres:33912
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Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070

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  1. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service.
  2. Babcock, Bruce A. & Hennessy, David A., 1996. "Input Demand Under Yield and Revenue Insurance," Staff General Research Papers 794, Iowa State University, Department of Economics.
  3. Singerman, Ariel & Hart, Chad E. & Lence, Sergio H., 2010. "Demand For Crop Insurance By Organic Corn And Soybean Farmers In Three Major Producing States," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60935, Agricultural and Applied Economics Association.
  4. Sergio H. Lence & Dermot J. Hayes, 2000. "U.S. Farm Policy and the Variability of Commodity Prices and Farm Revenues," Center for Agricultural and Rural Development (CARD) Publications 00-wp239, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  5. Wright, Brian D, 1979. "The Effects of Ideal Production Stabilization: A Welfare Analysis Under Rational Behavior," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1011-33, October.
  6. Lence, Sergio H. & Hayes, Dermot J., 2005. "Genetically Modified Crops: Their Market and Welfare Impacts," Staff General Research Papers 12435, Iowa State University, Department of Economics.
  7. Klonsky, Karen & Greene, Catherine R., 2005. "Widespread Adoption of Organic Agriculture in the US: Are Market-Driven Policies Enough?," 2005 Annual meeting, July 24-27, Providence, RI 19382, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  8. Williams,Jeffrey C. & Wright,Brian D., 1991. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521326162.
  9. Paulson, Nicholas D. & Babcock, Bruce A., 2007. "Get a GRIP: Should Area Revenue Coverage be Offered through the Farm Bill or as a Crop Insurance Program?," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9842, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Singerman, Ariel & Lence, Sergio H. & Kimble-Evans, Amanda, 2010. "Organic Crop Prices, or 2x Conventional Ones?," Staff General Research Papers 31544, Iowa State University, Department of Economics.
  11. Babcock, Bruce A. & Blackmer, A. M., 1992. "Value of Reducing Temporal Input Nonuniformities (The)," Staff General Research Papers 10587, Iowa State University, Department of Economics.
  12. Chad E. Hart & Dermot J. Hayes & Bruce A. Babcock, 2003. "Insuring Eggs in Baskets," Center for Agricultural and Rural Development (CARD) Publications 03-wp339, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  13. Loureiro, Maria L. & McCluskey, Jill J. & Mittelhammer, Ronald C., 2001. "Assessing Consumer Preferences For Organic, Eco-Labeled, And Regular Apples," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(02), December.
  14. Nicolai V. Kuminoff & Ada Wossink, 2010. "Why Isn't More US Farmland Organic?," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 240-258.
  15. Babcock, Bruce A. & Blackmer, Alfred M., 1992. "The Value Of Reducing Temporal Input Nonuniformities," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(02), December.
  16. Keith H. Coble & Thomas O. Knight & Rulon D. Pope & Jeffery R. Williams, 1996. "Modeling Farm-Level Crop Insurance Demand with Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 439-447.
  17. McBride, William D. & Greene, Catherine R., 2008. "The Profitability of Organic Soybean Production," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6449, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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