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The Effect of Crop Insurance Premium Subsidies on Soybean Producers' Risk Management Portfolios

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  • Hungerford, Ashley
  • Rosch, Stephanie

Abstract

We examine how reducing subsidies for federal crop insurance affects the risk management portfolios of US soybean producers. We apply the portfolio optimization approach of Das and Statman \citeyearpar{das2013options} to model how producers’ risk management portfolios change as subsidies for federal crop insurance premiums change, and examine how the changes to the risk management portfolios impact farmers’ on-farm income and exposure to downside risk. We optimize farmers’ risk management portfolio by adjusting the budget shares dedicated to each of four risk management tools: returns on production, forward contracting, savings, and crop insurance.

Suggested Citation

  • Hungerford, Ashley & Rosch, Stephanie, 2016. "The Effect of Crop Insurance Premium Subsidies on Soybean Producers' Risk Management Portfolios," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235341, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235341
    DOI: 10.22004/ag.econ.235341
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    References listed on IDEAS

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    3. Moschini, Giancarlo & Hennessy, David A., 2001. "Uncertainty, risk aversion, and risk management for agricultural producers," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 2, pages 88-153, Elsevier.
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    Keywords

    Agricultural and Food Policy; Agricultural Finance; Farm Management; Risk and Uncertainty;
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