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Area-Measured Crop Insurance And Disaster Aid For Wheat And Grain Sorghum

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Listed:
  • Williams, Jeffery R.
  • Carriker, Gordon L.
  • Barnaby, G. Art
  • Harper, Jayson K.
  • Black, J. Roy

Abstract

Area crop insurance and disaster aid program designs are compared to an individual farm-yield insurance design like the current FCIC multiple peril program. Stochastic dominance analysis of net return distributions for 45 wheat and grain sorghum farms in southcentral Kansas is used to determine which strategy is preferred. The area disaster aid program is preferred by generally risk-averse managers over the individual farm-yield design for wheat and sorghum. When individual farm crop insurance is compared directly with ~rea crop insurance, given an equivalent level of government liability for each, individual insurance is usually preferred by risk-averse managers. When the premium for the area insurance is subsidized by 10 percent or more, slightly risk-averse managers usually prefer area insurance to full-cost individual insurance. For area crop insurance to be preferred by managers that are more strongly risk averse, a higher subsidy level is required.

Suggested Citation

  • Williams, Jeffery R. & Carriker, Gordon L. & Barnaby, G. Art & Harper, Jayson K. & Black, J. Roy, 1991. "Area-Measured Crop Insurance And Disaster Aid For Wheat And Grain Sorghum," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271256, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea91:271256
    DOI: 10.22004/ag.econ.271256
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    References listed on IDEAS

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    1. Lemieux, Catharine M. & Richardson, James W. & Nixon, Clair J., 1982. "Federal Crop Insurance Vs. Ascs Disaster Assistance For Texas High Plains Cotton Producers: An Application Of Whole-Farm Simulation," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 7(2), pages 1-14, December.
    2. Carriker, Gordon L. & Williams, Jeffery R. & Barnaby, Glenn Arthur, Jr. & Black, J. Roy, 1991. "Yield And Income Risk Reduction Under Alternative Crop Insurance And Disaster Assistance Designs," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(2), pages 1-13, December.
    3. Carriker, Gordon L. & Williams, Jeffery R. & Barnaby, Glenn Arthur, Jr. & Black, J. Roy, 1990. "Risk Reduction Under An Area Yield-Based Crop Insurance Plan for Southcentral Kansas Winter Wheat," Staff Papers 133756, Kansas State University, Department of Agricultural Economics.
    4. Raskin, Rob & Cochran, Mark J., 1986. "Interpretations And Transformations Of Scale For The Pratt-Arrow Absolute Risk Aversion Coefficient: Implications For Generalized Stochastic Dominance," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 11(2), pages 1-7, December.
    5. Leatham, David J. & McCarl, Bruce A. & Richardson, James W., 1987. "Implications of Crop Insurance for Farmers and Lenders," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(2), pages 113-120, December.
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    Cited by:

    1. Turvey, Calum G. & Islam, Zahirul, 1995. "Equity and efficiency considerations in area versus individual yield insurance," Agricultural Economics, Blackwell, vol. 12(1), pages 23-35, April.

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