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Article
Publication date: 3 May 2013

Keith H. Coble, Thomas O. Knight, Mary Frances Miller, Barry J. Goodwin, Roderick M. Rejesus and Ryan Boyles

The purpose of this research is to investigate the degree to which trends and structural change may have altered crop insurance expected loss cost ratios across time…

Abstract

Purpose

The purpose of this research is to investigate the degree to which trends and structural change may have altered crop insurance expected loss cost ratios across time. Because loss experience is used to set rates for the program, these changes can impact the premiums paid by producers and cost to the government.

Design/methodology/approach

County level adjusted loss cost data was merged with climate division weather data for the 1980‐2009 period. Crop‐specific regional‐level regression models were estimated to test for trends and structural changes in the loss experience for major crops (corn, soybeans, sorghum, cotton, winter wheat, and spring wheat). Climate data was used to control for the effect of weather.

Findings

For several crops and regions, a significant break point in the loss cost data is found at 1995. This is consistent with the policy changes that occurred in in the program due to the 1994 legislative change. In most instances loss experience prior to 1995 is higher than more recent years even when controlling for the effect of weather. The exception is in winter wheat where it appears recent experience may be worse rather than older experience.

Originality/value

This paper provides a large‐scale assessment of the magnitude of improved crop insurance loss experience across time.

Details

Agricultural Finance Review, vol. 73 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 5 May 2000

Jeffrey R. Stokes, Keith H. Coble and Robert Dismukes

Passage of the 1996 Farm Bill marked a dramatic departure in federal farm policy as the longstanding deficiency payment program was replaced with non‐risk responsive…

Abstract

Passage of the 1996 Farm Bill marked a dramatic departure in federal farm policy as the longstanding deficiency payment program was replaced with non‐risk responsive transition payments. In light of the departure, subsidized savings has been proposed as a mechanism to provide risk protection to agricultural producers. Using Canada’s National Income Stabilization Account (NISA) program as an example of a subsidized savings program, a stochastic programming model of income stabilization is developed. The model is then used to investigate the optimizing behavior of a typical Midwestern crop producer. The results suggest a fair amount of program design flexibility exists, and that the government can use this flexibility to stimulate initial and continual participation while minimizing capital outlays.

Details

Agricultural Finance Review, vol. 60 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

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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

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Article
Publication date: 3 May 2013

Julia I. Borman, Barry K. Goodwin, Keith H. Coble, Thomas O. Knight and Rod Rejesus

The purpose of this paper is to be an academic inquiry into rating issues confronted by the US Federal Crop Insurance program stemming from changes in participation rates…

Abstract

Purpose

The purpose of this paper is to be an academic inquiry into rating issues confronted by the US Federal Crop Insurance program stemming from changes in participation rates as well as the weighting of data to reflect longer‐run weather patterns.

Design/methodology/approach

The authors investigate two specific approaches that differ from those adopted by the Risk Management Agency, building upon standard maximum likelihood and Bayesian estimation techniques that consider parametric densities for the loss‐cost ratio.

Findings

Both approaches indicate that incorporating weights into the priors for Bayesian estimation can inform the distribution.

Originality/value

In most cases, the authors' results indicate that including weighting into priors for Bayesian estimation implied lower premium rates than found using standard methods.

Details

Agricultural Finance Review, vol. 73 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

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Book part
Publication date: 3 June 2008

Jayson L. Lusk and Keith H. Coble

This paper investigates whether individuals’ risk-taking behavior is affected by background risk by analyzing individuals’ choices over a series of lotteries in a…

Abstract

This paper investigates whether individuals’ risk-taking behavior is affected by background risk by analyzing individuals’ choices over a series of lotteries in a laboratory setting in the presence and absence of independent, uncorrelated background risks. Overall, our results were mixed. We found some support for the notion that individuals were more risk averse when faced with the introduction of an unfair or mean-preserving background risk than when no background risk was present, but this finding depends on how individuals incorporate endowments and background gains and losses into their utility functions and how error variance is modeled.

Details

Risk Aversion in Experiments
Type: Book
ISBN: 978-1-84950-547-5

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Book part
Publication date: 3 June 2008

Abstract

Details

Risk Aversion in Experiments
Type: Book
ISBN: 978-1-84950-547-5

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Article
Publication date: 1 November 2002

Joseph W. Glauber, Keith J. Collins and Peter J. Barry

Since 1980, the principal form of crop loss assistance in the United States has been provided through the Federal Crop Insurance Program. The Federal Crop Insurance Act of…

Abstract

Since 1980, the principal form of crop loss assistance in the United States has been provided through the Federal Crop Insurance Program. The Federal Crop Insurance Act of 1980 was intended to replace disaster programs with a subsidized insurance program that farmers could depend on in the event of crop losses. Crop insurance was seen as preferable to disaster assistance because it was less costly and hence could be provided to more producers, was less likely to encourage moral hazard, and less likely to encourage producers to plant crops on marginal lands. Despite substantial growth in the program, the crop insurance program has failed to replace other disaster programs as the sole form of assistance. Over the past 20 years, producers received an estimated $15 billion in supplemental disaster payments in addition to $22 billion in crop insurance indemnities.

Details

Agricultural Finance Review, vol. 62 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

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Article
Publication date: 26 August 2014

Harun Bulut and Keith J. Collins

The purpose of this paper is to use simulation analysis to assess farmer choice between crop insurance and supplemental revenue options as proposed during development of…

Abstract

Purpose

The purpose of this paper is to use simulation analysis to assess farmer choice between crop insurance and supplemental revenue options as proposed during development of the Agricultural Act of 2014.

Design/methodology/approach

The certainty equivalent of wealth is used to rank farm choices and assess the effects of supplemental revenue options on the crop insurance plan and coverage level chosen by the producer under a range of farm attributes. The risk-reducing effectiveness of the select programs is also examined through their impact on the farm revenue distribution. The dependence structure of yield and prices is modeled by applying copula techniques on historical data.

Findings

Farm program supplemental revenue programs generally have no effect on crop insurance choices. Crop insurance supplemental revenue programs typically reduce crop insurance coverage at high coverage levels. An individual plan of crop insurance combined with a supplemental revenue insurance plan may substitute for incumbent area crop insurance plans.

Originality/value

The analysis provides insights into farmers’ possible choices by focussing on alternative crops and farm attributes and extensive scenarios, using current data, crop insurance plans and programs contained in the 2014 Farm Bill and related bills. The results should be of value to policy officials and producers in regards to the design and use of risk management tools.

Details

Agricultural Finance Review, vol. 74 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

Abstract

Details

Agricultural Finance Review, vol. 76 no. 1
Type: Research Article
ISSN: 0002-1466

Content available
Article
Publication date: 5 May 2015

Assistant Professor Lysa Porth and Professor ßKen Seng Tan

Abstract

Details

Agricultural Finance Review, vol. 75 no. 1
Type: Research Article
ISSN: 0002-1466

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