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Designing farm supplemental revenue coverage options on top of crop insurance coverage

Author

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  • Harun Bulut
  • Keith J. Collins

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.

Suggested Citation

  • Harun Bulut & Keith J. Collins, 2014. "Designing farm supplemental revenue coverage options on top of crop insurance coverage," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 74(3), pages 397-426, August.
    • Handle: RePEc:eme:afrpps:v:74:y:2014:i:3:p:397-426
    DOI: 10.1108/AFR-08-2013-0032
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    Citations

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    Cited by:

    1. Devadoss, Stephen & Luckstead, Jeff, 2018. "Production and Moral Hazard Effects of 2014 Cotton Farm Bill Policies," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266763, Southern Agricultural Economics Association.
    2. Xiaofei Li & Zhiwei Shen & Ardian Harri & Keith H. Coble, 2020. "Comparing survey-based and programme-based yield data: implications for the U.S. Agricultural Risk Coverage-County programme," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 184-202, January.
    3. Bulut, Harun, 2016. "U.S. Farmers’ Insurance Choices under Expected Utility Theory and Cumulative Prospect Theory," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236019, Agricultural and Applied Economics Association.
    4. Xuche Gong & David A. Hennessy & Hongli Feng, 2023. "Systemic risk, relative subsidy rates, and area yield insurance choice," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(3), pages 888-913, May.
    5. Luitel, Kishor P. & Hudson, Darren & Knight, Thomas O., 2015. "Understanding Cotton Producer’s Crop Insurance Choices Under the 2014 Farm Bill," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205438, Agricultural and Applied Economics Association.

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