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Influence of Farm and Lease Type on Crop Insurance Returns

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  • Sharma, Sankalp
  • Walters, Cory G.

Abstract

At the beginning of each agricultural cycle producers face risks from uncertain harvest yields and prices. To assist in managing these risks the federal government offers subsidized crop insurance. Since the 1996 Farm Act, crop insurance has been the cornerstone of risk management. In 2015, federal crop insurance represented over $9.5 billion in premiums and $102 billion in liabilities, compared to only $1.8 billion dollars in premiums and $26 billion in liabilities in 1996 (Risk Management Agency (RMA)). While the premium rate tailoring by the RMA is aimed at improving actuarial performance, it may not be sufficient. That is, are there other farm characteristics that the insurer observes, which deserve consideration? For the producer, this could mean the opportunity for excess returns and for the insurance provider and the government, excess returns imply an inefficient program resulting in misallocation of scarce resources and increase in taxpayer cost. In this article, we empirically examine the impact of two specific farm characteristics, farm size and insured share on returns from crop insurance. Our results suggest that large producers are attaining higher crop insurance returns across regions and crops. Acknowledgement :
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  • Sharma, Sankalp & Walters, Cory G., 2018. "Influence of Farm and Lease Type on Crop Insurance Returns," 2018 Annual Meeting, August 5-7, Washington, D.C. 273881, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea18:273881
    DOI: 10.22004/ag.econ.273881
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    Keywords

    Food and Agricultural Policy Analysis; Behavioral & Institutional Economics; Risk and Uncertainty;
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