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Article
Publication date: 4 September 2017

HongSeok Seo, Taehoo Kim, Man-Keun Kim and Bruce A. McCarl

Recently, USDA-RMA introduced a Trend Adjusted-Actual Production History (TA-APH) program, which increases APH by a trend factor to cover yield changes over time. The purpose of…

Abstract

Purpose

Recently, USDA-RMA introduced a Trend Adjusted-Actual Production History (TA-APH) program, which increases APH by a trend factor to cover yield changes over time. The purpose of this paper is to examine the effects of the TA-APH program on farmer participation, coverage election, and risk by analyzing data before and after the program.

Design/methodology/approach

Since the program was carried out in selected counties, the authors employ a difference in differences approach doing comparisons of insurance participation and coverage levels between eligible and ineligible counties.

Findings

The authors find that farmers within the counties where the TA-APH program was available experienced an increase in insured acres of 3 percent for corn and 5 percent for soybeans. The authors also find the farmers eligible for the program purchased lower coverage levels relative to those not eligible. However, the magnitude of that negative effect is relatively small, −0.9 percent in corn and −1.3 percent in soybeans. Collectively the evidence shows the TA-APH program does increase the guaranteed yield level mitigating farmer risk.

Research limitations/implications

The data set used only permitted analysis at the county level, thus the authors could not look at the individual farmer choices.

Practical implications

The results suggest that if a greater level of farmer risk protection is desired from crop insurance, the authors find that the trend adjustment as implemented was a successful way to achieve this.

Originality/value

This paper contributes to the literature on the crop insurance by evaluating the program controlling for a non-participating groups, farming experience, liability rates, and subsidy rates. In doing this, it fulfills an identified need to study the actual impact on participation rates and coverage levels elected.

Details

Agricultural Finance Review, vol. 77 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 31 December 2002

Gary D. Schnitkey, Bruce J. Sherrick and Scott H. Irwin

This study evaluates the impacts on gross revenue distributions of the use of alternative crop insurance products across different coverage levels and across locations with…

Abstract

This study evaluates the impacts on gross revenue distributions of the use of alternative crop insurance products across different coverage levels and across locations with differing yield risks. Results are presented in terms of net costs, values‐at‐risk, and certainty equivalent returns associated with five types of multi‐peril crop insurance across different coverage levels. Findings show that the group policies often result in average payments exceeding their premium costs. Individual revenue products reduce risk in the tails more than group policies, but result in greater reductions in mean revenues. Rankings based on certainty equivalent returns and low frequency VaRs generally favor revenue products. As expected, crop insurance is associated with greater relative risk reduction in locations with greater underlying yield variability.

Details

Agricultural Finance Review, vol. 63 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 25 October 2018

Timothy A. Delbridge and Robert P. King

The USDA’s Risk Management Agency (RMA) made several changes to the crop insurance products available to organic growers for the 2014 crop year. Most notably, a 5 percent premium…

Abstract

Purpose

The USDA’s Risk Management Agency (RMA) made several changes to the crop insurance products available to organic growers for the 2014 crop year. Most notably, a 5 percent premium surcharge was removed and organic-specific transitional yields (t-yields) were issued for the first time. The purpose of this paper is to use farm-level organic crop yield data to analyze the impact of these reforms on producer insurance outcomes and compare the insurance options for new organic growers.

Design/methodology/approach

This study uses a unique panel data set of organic corn and soybean yields to analyze the impact of organic crop insurance reforms. Actual Production History values and premium rates are calculated for each farm and crop yield sequence. Producer loss ratios and subsidized premium wedges are compared for yield, revenue and area-risk products before and after the instituted reforms.

Findings

Results indicate that RMA succeeded in improving the actuarial soundness of the organic insurance program, though further refinement of organic t-yields may be necessary to accurately reflect the yield potential of organic producers and avoid reductions in program participation.

Originality/value

This paper provides insight into the effectiveness of reforms intended to improve the actuarial soundness of organic crop insurance and demonstrates the effect that the reforms are likely to have on new and existing organic farms. Because this analysis uses data collected independently of RMA and includes farms that may or may not have purchased crop insurance, it avoids the self-selection problems that might affect analyses using crop insurance program data.

Details

Agricultural Finance Review, vol. 79 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 6 November 2009

Gabriel J. Power, Dmitry V. Vedenov and Sung‐wook Hong

The purpose of this paper is to analyze the effect of the 2008 Farm Bill's average crop revenue election (ACRE) program on the risk‐reducing effectiveness of crop insurance…

Abstract

Purpose

The purpose of this paper is to analyze the effect of the 2008 Farm Bill's average crop revenue election (ACRE) program on the risk‐reducing effectiveness of crop insurance products.

Design/methodology/approach

Three crop/region combinations are examined, representing regions with both high and low price‐yield correlation regions. Actual production history (APH) and crop revenue coverage (CRC) insurance instruments are considered separately under the 2002 Farm Bill and under ACRE. Monte Carlo simulations, combined with the copula approach, are used to simulate net wealth distributions and to calculate the corresponding expected utilities. The outcomes are evaluated using certainty‐equivalent wealth based on different risk premium assumptions.

Findings

Crop insurance contracts appear to be more effective under the 2002 Farm Bill than under ACRE, especially for crops characterized by low yield‐price correlation. CRC insurance is found to be more effective than APH insurance for all crop/region combinations considered.

Research limitations/implications

The paper only considers a static framework and farm‐level insurance contracts. Further research could investigate how ACRE affects decoupled income support, whether the results change if Supplemental Revenue Assistance is included, or how different the outcomes might be for multiple‐crop farms.

Practical implications

The results suggest that risk‐reducing effectiveness decreases under ACRE and that no reasonable adjustment to APH base price can make APH competitive with CRC for any crop/regions considered.

Originality/value

The risk‐reducing effectiveness of the 2008 Farm Bill's ACRE program is analyzed, and as a methodological contribution the copula approach is used to model the multivariate distribution of yields and prices.

Details

Agricultural Finance Review, vol. 69 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 9 November 2010

Roderick M. Rejesus, Barry K. Goodwin, Keith H. Coble and Thomas O. Knight

This article seeks to examine the reference yield calculation method used in crop insurance rating and provides recommendations that could potentially improve actuarial…

Abstract

Purpose

This article seeks to examine the reference yield calculation method used in crop insurance rating and provides recommendations that could potentially improve actuarial performance of the Federal crop insurance program.

Design/methodology/approach

Conceptual, numerical, and statistical analysis is utilized to evaluate the reference yield calculation method used in the US Federal crop insurance program.

Findings

The results suggest that reference yields, which at the time of this study are calculated using National Agricultural Statistics Service (NASS) data, do not accurately represent the average actual yields of the insured pool of producers in the Federal crop insurance program. In addition, it is found that not regularly updating these NASS‐based reference yields exacerbates this problem because these reference yields do not appropriately represent the current state of technological progress.

Practical implications

The empirical analysis leads this paper to recommend a reference yield calculation procedure that utilizes county‐average yields from the risk management agency (RMA) participation database and an approach that uses spatially aggregated average yields in cases when data for a particular county are sparse.

Originality/value

No previous study has investigated the reference yield calculation method in the Federal crop insurance program using both RMA and NASS data sets. Moreover, this study contributes to the small literature that examines various aspects of the actual production history (APH) rating platform and suggests refinements to improve actuarial performance.

Details

Agricultural Finance Review, vol. 70 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 5 May 2004

James G. Pritchett, George F. Patrick, Kurt J. Collins and Ana Rios

Returns to a model farm are simulated to assess the impact of marketing and insurance risk management tools as measured by mean net returns and returns at 5% value‐at‐risk (VaR)…

Abstract

Returns to a model farm are simulated to assess the impact of marketing and insurance risk management tools as measured by mean net returns and returns at 5% value‐at‐risk (VaR). Results indicate that revenue insurance strategies and strategies involving a combination of price and yield protection provide substantial downside revenue protection, while mean net returns only modestly differ from the benchmark harvest sale strategy when considering all years between 1986 and 2000.

Details

Agricultural Finance Review, vol. 64 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 4 May 2012

Joseph Cooper, Carl Zulauf, Michael Langemeier and Gary Schnitkey

Farm level data are essential to accurate setting of crop insurance premium rates, but their time series tends to be too short to allow them to be the sole data source. County…

Abstract

Purpose

Farm level data are essential to accurate setting of crop insurance premium rates, but their time series tends to be too short to allow them to be the sole data source. County level data are available in longer time series, however. The purpose of this paper is to present a methodology to make full use of the information inherent in each of these data sets.

Design/methodology/approach

The paper uses a novel application of statistical tools for using farm and county level yield data to generate farm level yield densities that explicitly incorporate within county yield heterogeneity while accounting for systemic risk and other spatial or intertemporal correlations among farms within the county.

Findings

The empirical analysis shows that current approaches used by the Risk Management Agency to individualize premiums for a farm result in substantial mispricing of crop insurance premiums because they do not adequately capture farm yield variability and yield correlations between farms. The new premium setting method is empirically shown to substantially reduce government subsidies for crop insurance premiums.

Originality/value

The paper demonstrates how to extract more information from available data when setting crop insurance premiums, which allows the government to more closely tailor premiums to the farm than do current approaches.

Article
Publication date: 4 September 2017

Anna Duchenko, Tetiana Deshko and Marina Braga

Civil society played a significant role during and after the 2014 revolution in Ukraine, which led to the resignation of President Yanukovich and his government and triggered a…

Abstract

Purpose

Civil society played a significant role during and after the 2014 revolution in Ukraine, which led to the resignation of President Yanukovich and his government and triggered a series of political, economic and social changes. In some areas, particularly by HIV and tuberculosis, the critical gaps threatened the emergence of a public health catastrophe. The purpose of this paper is to describe how civil society expands and strengthens its role in complex crisis situations, self-regulating and re-adjusting own aims and strategy by using the case of non-governmental organisations (NGOs) active in HIV prevention in high-risk groups and harm reduction.

Design/methodology/approach

The paper presents the analysis of the case of Alliance of Public Health, one of the principal recipients of the Global Fund to Fight Tuberculosis, AIDS and Malaria in 2014-2016, during and after the Euromaidan Revolution in Ukraine.

Findings

In the post-Euromaidan era, NGO sector has been able to sustain the response to the HIV/AIDS epidemic at a stable level despite significant limitations of resources and the overall fragile situation. Special efforts have been undertaken to continue activities in the conflict zone in the east of the country. Furthermore, NGOs managed to extend beyond their usual responsibilities, bridging the gaps in deteriorating public health and social systems, including taking the leadership in medical procurement; advocating for national plans development; and supplying medical goods to the uncontrolled territories in the east of the country.

Originality/value

This paper is one of the first exploring the role of non-governmental sector in HIV/AIDS programmes in resource-scarce situation of political, social and economic crisis. Case description of the strategies and activities applied in the situation gives the possibility to reflect on raising the effectiveness of the response to existing and emerging public health issues in complex crisis, as well on the potential for HIV/AIDS prevention and treatment advocacy to grow into global health diplomacy.

Details

Drugs and Alcohol Today, vol. 17 no. 3
Type: Research Article
ISSN: 1745-9265

Keywords

Article
Publication date: 2 November 2012

Anton Bekkerman, Vincent H. Smith and Myles J. Watts

The aim of this paper is to show how provisions of the Supplemental Revenue Assistance Payments (SURE) program impacts production practices, and empirically examine changes in…

Abstract

Purpose

The aim of this paper is to show how provisions of the Supplemental Revenue Assistance Payments (SURE) program impacts production practices, and empirically examine changes in crop insurance participation rates as a means of measuring producer responses to the program.

Design/methodology/approach

The structure of the SURE program is described and a stylized theoretical model is used to show the SURE program's effects on farm‐level crop insurance and production decisions. A county‐level cross‐sectional empirical specification with regional fixed effects is used to test the hypothesis that producers who are most likely to benefit from production practice re‐optimization are more likely to participate in crop insurance.

Findings

Results from empirical analyses of corn, soybean, and wheat production areas show that the SURE program has had substantial impacts on crop insurance participation by producers who are more likely to receive SURE indemnities and exploit moral hazard opportunities.

Research limitations/implications

Because the program has only recently been introduced, empirical estimates of the program's long‐run impacts are not estimable.

Practical implications

Results indicate that the program can have unexpected market consequences, with increased frequency and size of SURE indemnity claims than the Congressional Budget Office anticipated and increases in aggregate tax payer subsidies for both the crop insurance and SURE program. These outcomes can have important implications on motivating a restructuring of the program in the next farm bill.

Social implications

Increased tax payer expenditures on the SURE and crop insurance programs in the form of subsidies can lead to non‐trivial reductions in social welfare.

Originality/value

This research is the first to develop a rigorous model of the SURE program's impacts on producer responses and associated effects on crop insurance participation. The study also provides empirical evidence of these effects.

Details

Agricultural Finance Review, vol. 72 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 8 May 2009

Matthew Ginder, Aslihan D. Spaulding, Kerry W. Tudor and J. Randy Winter

The purpose of this paper is to determine which factors are most influential to farmers' crop insurance purchasing decisions in northern Illinois.

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Abstract

Purpose

The purpose of this paper is to determine which factors are most influential to farmers' crop insurance purchasing decisions in northern Illinois.

Design/methodology/approach

A mail survey method was used to collect information from farmers in a 42 county region of Illinois.

Findings

Of the factors analyzed, price had the most significant effect on crop insurance purchase decisions. While acres farmed had statistically significant impact on most of the crop insurance purchase decisions, different factors played a role in purchase decisions based on types of insurance and types of crops covered.

Research limitations/implications

The results of this study warrant additional research relative to crop insurance purchase decisions. Analyzing the affect of varying degrees of government subsidization across crop insurance plans and coverage levels on purchase decisions is recommended. Questions regarding the relationship between crop insurance subsidization, farm program payments, and ad hoc disaster payments would be relevant in light of World Trade Organization and federal budget discussions. Also, asking participants to indicate if they have a written grain marketing plan and if that plan leverages crop insurance coverage to support forward contracting or pre‐harvest pricing would provide additional insights in determining how crop insurance purchase decisions are made. Questions regarding the claims process should be incorporated into future studies on this topic. The timeliness of claims payments, as well as the farmer's level of satisfaction with the claims adjustor and claims process may factor into the decision‐making process.

Practical implications

Illinois farmers and crop insurance agencies could benefit from this study. Findings could improve the crop insurance products and services available to Illinois farmers and make the federal crop insurance program more effective in enhancing farmers' ability to manage crop production risk.

Originality/value

This paper identified the factors that are most influential to farmers' crop insurance purchasing decisions in northern Illinois.

Details

Agricultural Finance Review, vol. 69 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

1 – 10 of 374