Search results

1 – 10 of over 12000
To view the access options for this content please click here
Article

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…

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

To view the access options for this content please click here
Article

Ashok K. Mishra and Barry K. Goodwin

This research examines factors influencing the adoption of crop and revenue insurance. This is accomplished by estimating a multinomial logit model of insurance choices…

Abstract

This research examines factors influencing the adoption of crop and revenue insurance. This is accomplished by estimating a multinomial logit model of insurance choices facing U.S. farmers. Results indicate significant differences in the probabilities of adoption of each insurance plan. The levels of selected explanatory variables, such as operator’s education level, debt‐to‐asset ratio, off‐farm income, soil productivity, participation in production and marketing contracts, and type of farm ownership, appear to be the determinants of the probability of having adopted each insurance plan.

Details

Agricultural Finance Review, vol. 63 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

To view the access options for this content please click here
Article

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

To view the access options for this content please click here
Article

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…

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

To view the access options for this content please click here
Article

Joleen C. Hadrich

– The purpose of this paper is to determine the sources and factors affecting farm revenue variation on crop and livestock farms in the Northern Great Plains.

Abstract

Purpose

The purpose of this paper is to determine the sources and factors affecting farm revenue variation on crop and livestock farms in the Northern Great Plains.

Design/methodology/approach

A two method approach is used. Variance decomposition analysis is completed on an 18-year balanced panel data set of North Dakota producers to determine the sources of farm revenue variation. The second component of this research uses a random effects estimator to determine the effect of farm characteristics on farm revenue variation measured by coefficient of variation.

Findings

Crop revenue is the largest source of farm revenue variation, with crop insurance being the largest source of revenue variation diversification. Small market crops and corn were found to increase revenue variation compared to those operations that received the largest sum of their revenue from wheat. Government payments and insurance payments were also found to increase farm revenue variation indicating they may provide an incentive to plant more risky crops.

Originality/value

This analysis examined specific enterprises that affect farm revenue variation, which has not been examined in earlier work. This distinction allows for focus on potential policy implications of small market crops and new crops in “transitional planting zones”.

Details

Agricultural Finance Review, vol. 73 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

To view the access options for this content please click here
Article

Shyam Adhikari, Eric J. Belasco and Thomas O. Knight

The purpose of this paper is to examine the spatial components of producer heterogeneity in crop insurance product selection among US corn producers and identifies…

Abstract

Purpose

The purpose of this paper is to examine the spatial components of producer heterogeneity in crop insurance product selection among US corn producers and identifies neighborhood spillover or agent marketing effects in these decisions.

Design/methodology/approach

County‐level insurance and yield data are used to demonstrate that a gradual shift from yield‐based insurance to revenue‐based insurance has spatial patterns. Conventional risk variables such as yield variability, price variability, prevalence of irrigation, other crops, and yield‐price relationships play an important role in this shift and are consistently estimated only when spatial components are included. A spatial random effects model is used to also identify the impact of spatial lag effects, which include neighborhood spillover and agent marketing effects, on the share of corn acres insured with revenue‐based plans vs yield‐based plans.

Findings

Theoretically consistent variables associated with risk are found to significantly influence the choice between crop revenue and yield insurance. Non‐linear parameters identify the region‐specific effects from changes in irrigation, yield price correlation, and the prevalence of corn production on insurance decisions. In addition, spatial components such as the decisions made by nearby producers and marketing drives are also found to influence decisions. These results may demonstrate the relative influence of trusted sources, such as nearby producers and insurance agents, on insurance decisions.

Originality/value

Traditional risk variables are consistently estimated by controlling for spatial heterogeneity. This study also reveals the propensity of producers to rely on the opinions of other producers or agents that they know.

Details

Agricultural Finance Review, vol. 70 no. 1
Type: Research Article
ISSN: 0002-1466

Keywords

To view the access options for this content please click here
Article

Vincent H. Smith

Rent seeking is endemic to the process through which any policy or regulatory initiative is developed in the USA. The purpose of this paper is to show how farm and other…

Abstract

Purpose

Rent seeking is endemic to the process through which any policy or regulatory initiative is developed in the USA. The purpose of this paper is to show how farm and other interest groups have formed coalitions to benefit themselves at the expense of the federal government by examining the legislative history of the federal crop insurance program.

Design/methodology/approach

The federal crop insurance legislation and the way in which the USDA Risk Management Agency manages federal crop insurance program are replete with complex and subtle policy initiatives. Using a new theoretical framework, the study examines how, since 1980, three major legislative initiatives – the 1980 Federal Crop Insurance Act, the 1994 Crop Insurance Reform Act and the 2000 Agricultural Risk Protection Act – were designed to jointly benefit farm interest groups and the agricultural insurance industry, largely through increases in government subsidies.

Findings

Each of the three legislative initiatives examined here included provisions that, when considered individually, benefitted farmers and adversely affected the insurance industry, and vice versa. However, the joint effects of the multiple adjustments included in each of those legislative initiatives generated net benefits for both sets of interest groups. The evidence, therefore, indicates that coalitions formed between the farm and insurance lobbies to obtain policy changes that, when aggregated, benefited both groups, as well as banks with agricultural lending portfolios. However, those benefits came at an increasingly substantial cost to taxpayers through federal government subsidies.

Originality/value

This is the first analysis of the US federal crop insurance program to examine the issue of coalition formation.

Details

Agricultural Finance Review, vol. 80 no. 3
Type: Research Article
ISSN: 0002-1466

Keywords

To view the access options for this content please click here
Article

Bingfan Ke and H. Holly Wang

Due to the low crop insurance participation by grain growers in the Pacific Northwest, the performance of insurance programs and the futures market is assessed in this…

Abstract

Due to the low crop insurance participation by grain growers in the Pacific Northwest, the performance of insurance programs and the futures market is assessed in this area. Revenue insurance, combined with the futures and government programs, is identified as the optimal risk management portfolio. Although yield risk level, decision maker’s risk preference, and actuarial fairness of premiums can all affect farmers’ choices, the current subsidy policy is most influential. The varying subsidy levels induce farmers’ subsidy‐seeking incentive and suppress the risk‐reducing incentive. There is little diversification effect from growing two crops in the rotation instead of one.

Details

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

Keywords

To view the access options for this content please click here
Article

Barry K. Goodwin

The federal crop insurance program has become the cornerstone of US agricultural policy. Since its introduction in the mid-1990s, crop revenue insurance has grown in…

Abstract

Purpose

The federal crop insurance program has become the cornerstone of US agricultural policy. Since its introduction in the mid-1990s, crop revenue insurance has grown in prominence and now represents nearly 90 percent of liability for major crops. The pricing and design of revenue insurance raises a number of important challenges. The 2014 Farm Bill brought about several important changes in the program, resulting in a moving target for analysts and researchers. The paper aims to discuss these issues.

Design/methodology/approach

The risks are of a multivariate nature and are likely to be highly dependent on one another. The crop insurance setting is also constantly changing, with technological changes in production practices and highly volatile commodity prices. Compounding these challenges is the fact that US policymakers continually change the program.

Findings

The program has indeed undergone many changes and a number of important research questions need to be addressed.

Originality/value

Original research based upon recent policy.

Details

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

Keywords

To view the access options for this content please click here
Article

A. Ford Ramsey, Sujit K. Ghosh and Barry K. Goodwin

Revenue insurance is the most popular form of insurance available in the US federal crop insurance program. The majority of crop revenue policies are sold with a harvest…

Abstract

Purpose

Revenue insurance is the most popular form of insurance available in the US federal crop insurance program. The majority of crop revenue policies are sold with a harvest price replacement feature that pays out on lost crop yields at the maximum of a realized or projected harvest price. The authors introduce a novel actuarial and statistical approach to rate revenue insurance policies with exotic price coverage: the payout depends on an order statistic or average of prices. The authors examine the price implications of different dependence models and demonstrate the feasibility of policies of this type.

Design/methodology/approach

Hierarchical Archimedean copulas and vine copulas are used to model dependence between prices and yields and serial dependence of prices. The authors construct several synthetic exotic price coverage insurance policies and evaluate the impact of copula models on policies covering different types of risk.

Findings

The authors’ findings show that the price of exotic price coverage policies is sensitive to the choice of dependence model. Serial dependence varies across the growing season. It is possible to accurately price exotic coverage policies and we suggest these add-ons as a possible avenue for developing private crop insurance markets.

Originality/value

The authors apply hierarchical Archimedean copulas and vine copulas that allow for flexibility in the modeling of multivariate dependence. Unlike previous research, which has primarily considered dependence across space, the form of exotic price coverage requires modeling serial dependence in relative prices. Results are important for this segment of the agricultural insurance market: one of the main areas that insurers can develop private products around the federal program.

Details

Agricultural Finance Review, vol. 80 no. 5
Type: Research Article
ISSN: 0002-1466

Keywords

1 – 10 of over 12000