Crop insurance in malting barley: a stochastic dominance analysis

Abstract

Purpose

Malting barley is an important specialty crop in the Northern Plains and growers mitigate risk with federally subsidized crop insurance and production contracts. The purpose of this paper is to quantify risks growers face due to “coverage gaps” in crop insurance that result in uncertain indemnity payments when their crop does not meet contract specifications.

Design/methodology/approach

A stochastic dominance model is developed to evaluate alternative strategies for growers with differing risk attitudes and production practices (irrigation vs dryland).

Findings

The results illustrate how alternative crop insurance provisions affect efficient choice sets for growers. Risk premiums for irrigated growers all point to valuations favoring more coverage, contracts, and malting option B. As the crop insurance industry matures in the functions it performs, it will become increasingly more important to address quality attributes.

Originality/value

This paper addresses quality issues and coverage gaps in crop insurance provisions.

Citation

Wilson, W., Gustafson, C. and Dahl, B. (2009), "Crop insurance in malting barley: a stochastic dominance analysis", Agricultural Finance Review, Vol. 69 No. 1, pp. 98-112. https://doi.org/10.1108/00021460910960499