IDEAS home Printed from https://ideas.repec.org/p/ags/aaea10/61490.html
   My bibliography  Save this paper

Average Crop Revenue Election (ACRE) Program or Traditional Government Payment Programs: What Factors Matter?

Author

Listed:
  • Chen, Yunguang
  • Wang, H. Holly
  • Patrick, George F.

Abstract

Rankings of different risk management portfolios including Average Crop Revenue Election (ACRE), traditional government payment programs, crop insurance and hedging in futures; and optimal choices of insurance coverage levels and hedge ratios are evaluated for a representative central Indiana corn farm, using Monte Carlo simulation and optimization of expected utilities. The changes of preference between ACRE and traditional government programs under comprehensive scenarios of price and yield risks are studied. Also, Interactions between ACRE and other risk management instruments are examined, and government costs and risk management efficiencies between ACRE and traditional government programs are compared. The results show a strong preference of ACRE for the representative central Indiana corn farm in 2009, due to high ACRE guarantee price and expected drop in corn price from 2008 level. Even if the farm faces weak dependence between farm and aggregate yield, the risk could not offset the addition value ACRE could provide for this year. Also, it is found that there are synergistic effects between ACRE and two individual crop insurance plans but antagonistic effects between ACRE and group insurance plans. ACRE is more efficient than traditional government programs in terms of expected program costs.

Suggested Citation

  • Chen, Yunguang & Wang, H. Holly & Patrick, George F., 2010. "Average Crop Revenue Election (ACRE) Program or Traditional Government Payment Programs: What Factors Matter?," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61490, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:61490
    DOI: 10.22004/ag.econ.61490
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/61490/files/main%20paper%20AAEA%20Selected%20Paper%2011338%20NEW.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.61490?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Rulon D. Pope & Richard E. Just, 1991. "On Testing the Structure of Risk Preferences in Agricultural Supply Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 743-748.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mitchell, Paul D. & Rejesus, Roderick M. & Coble, Keith H. & Knight, Thomas O., 2011. "Analyzing Farmer Participation Intentions and Enrollment Rates for the Average Crop Revenue Election (ACRE) Program," Staff Paper Series 560, University of Wisconsin, Agricultural and Applied Economics.
    2. Mitchell, Paul D. & Rejesus, Roderick M. & Coble, Keith H. & Knight, Thomas O., 2010. "A Real Options Framework for Analyzing Program Participation as Human Capital Investments: The Case of the Average Crop Revenue Election (ACRE) Program," Staff Papers 92896, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alfons Oude Lansink, 1999. "Area Allocation Under Price Uncertainty on Dutch Arable Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(1), pages 93-105, January.
    2. Li, Chenguang & Sexton, Richard J., 2009. "Impacts of Retailers’ Pricing Strategies for Produce Commodities on Farmer Welfare," 2009 Conference, August 16-22, 2009, Beijing, China 51720, International Association of Agricultural Economists.
    3. Rob Fraser, 2018. "Compensation Payments and Animal Disease: Incentivising Farmers Both to Undertake Costly On-farm Biosecurity and to Comply with Disease Reporting Requirements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(3), pages 617-629, July.
    4. Kim, Tae-Hun, 2008. "The measurement of farmers' risk attitudes using a non-structural approach," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 31(2), pages 1-18, May.
    5. Thorne, Fiona S. & Hennessy, Thia C., 2006. "The Role of Risk in the Decision to Produce Post-Decoupling - A Stochastic Budgeting Example," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25415, International Association of Agricultural Economists.
    6. Z. Bar‐Shira & R.E. Just & D. Zilberman, 1997. "Estimation of farmers' risk attitude: an econometric approach," Agricultural Economics, International Association of Agricultural Economists, vol. 17(2-3), pages 211-222, December.
    7. CARPENTIER, Alain & GOHIN, Alexandre & SCKOKAI, Paolo & THOMAS, Alban, 2015. "Economic modelling of agricultural production: past advances and new challenges," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 96(01), March.
    8. Travis J. Lybbert & David R. Just, 2007. "Is Risk Aversion Really Correlated with Wealth? How Estimated Probabilities Introduce Spurious Correlation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 964-979.
    9. David A. Hennessy & Bruce A. Babcock & Dermot J. Hayes, 1997. "Budgetary and Producer Welfare Effects of Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1024-1034.
    10. Alexis Berg & Philippe Quirion & Benjamin Sultan, 2009. "Weather-index drought insurance in Burkina-Faso: assessment of its potential interest to farmers," Post-Print hal-00520893, HAL.
    11. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    12. Rob Fraser, 2012. "Moral Hazard, Targeting and Contract Duration in Agri‐Environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 63(1), pages 56-64, February.
    13. Chen, Xiaomei & Wang, H. Holly & Makus, Larry D., 2007. "Production Risk and Crop Insurance Effectiveness: Organic Versus Conventional Apples," SCC-76 Meeting, 2007, March 15-17, Gulf Shores, Alabama 9381, SCC-76: Economics and Management of Risk in Agriculture and Natural Resources.
    14. Olmos, Marta Fernandez & Martinez, Jorge Rosell, 2011. "The Quality-Quantity Trade-off in the Principal-Agent Framework," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 11(01), pages 1-12, January.
    15. Alpizar, Francisco & Carlsson, Fredrik & Naranjo, Maria, 2009. "The effect of risk, ambiguity, and coordination on farmers’ adaptation to climate change: A framed field experiment," Working Papers in Economics 382, University of Gothenburg, Department of Economics.
    16. Serra, Teresa & Goodwin, Barry K. & Featherstone, Allen M., 2011. "Risk behavior in the presence of government programs," Journal of Econometrics, Elsevier, vol. 162(1), pages 18-24, May.
    17. Just, Richard E., 1992. "Discovering Microeconomic Relationships in Agriculture," 1992 Conference (36th), February 10-13, 1992, Canberra, Australia 146530, Australian Agricultural and Resource Economics Society.
    18. Robert G. Chambers & Margarita Genius & Vangelis Tzouvelekas, 2021. "Invariant Risk Preferences and Supply Response under Price Risk," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1802-1819, October.
    19. Harold Alderman & Christina H. Paxson, 1994. "Do the Poor Insure? A Synthesis of the Literature on Risk and Consumption in Developing Countries," International Economic Association Series, in: Edmar L. Bacha (ed.), Economics in a Changing World, chapter 3, pages 48-78, Palgrave Macmillan.
    20. Sunil KANWAR & Elisabeth SADOULET, 2008. "Dynamic Output Response Revisited: The Indian Cash Crops," The Developing Economies, Institute of Developing Economies, vol. 46(3), pages 217-241, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea10:61490. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.