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Information Value of Climate Forecasts for Rainfall Index Insurance for Pasture, Rangeland,and Forage in the Southeast United States

Author

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  • Nadolnyak, Denis A.
  • Vedenov, Dmitry V.

Abstract

In this article, possible use of climate forecasts in rainfall index insurance of hay and forage production is considered in a geographical area (southeast United States) relatively heavily impacted by the El Nino Southern Oscillation (ENSO). Analysis of the stochastic properties of rainfall, yields, and the ENSO forecasts using the copula technique shows that the forecast impact depends on the proximity to the Gulf Coast where the impact of the ENSO is more pronounced and earlier in the year. Stochastic modeling shows that the use of skillful longterm climate forecasts by the insured producers creates intertemporal adverse selection that can be precluded by offering forecast conditional premiums. The impacts on the efficiency of the rainfall index insurance and results of sensitivity analysis with respect to model parameters are discussed.

Suggested Citation

  • Nadolnyak, Denis A. & Vedenov, Dmitry V., 2013. "Information Value of Climate Forecasts for Rainfall Index Insurance for Pasture, Rangeland,and Forage in the Southeast United States," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(1), pages 1-16, February.
    • Handle: RePEc:ags:joaaec:143638
    DOI: 10.22004/ag.econ.143638
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    Cited by:

    1. Collins, Wilson, 2022. "Potential Changes To Improve The Pasture, Rangeland, Forage Insurance Program," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322574, Agricultural and Applied Economics Association.
    2. Diersen, Matthew & Gurung, Pratik & Fausti, Scott, 2015. "Optimal Allocation of Index Insurance Intervals for Commodities," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196793, Southern Agricultural Economics Association.
    3. Brittney Goodrich & Jisang Yu & Monte Vandeveer, 2020. "Participation patterns of the rainfall index insurance for pasture, rangeland and forage programme," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 45(1), pages 29-51, January.

    More about this item

    Keywords

    Risk and Uncertainty;

    JEL classification:

    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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