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Stochastic Analysis of County and Multi County Yields for Agriculture Risk Coverage (ARC) payments for Arkansas Row Crop Producers

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  • Mane, Ranjitsinh
  • Watkins, Bradley

Abstract

The Agricultural Risk Coverage (ARC-CO) program authorized by the 2014 Farm Bill provides revenue loss coverage at the county level. The ARC-CO payments are based on actual county crop revenue for a particular commodity. The county revenue is a function of county yield and national price. Since the inception of the ARC-CO program, there has been a wide disparity in crop revenue payment between two or more counties with a similar production environment. The variation in county yield has resulted in quite wide disparity of payments for Arkansas producers based on the location of their farm. This study compared ARC-CO program for corn and soybean and their respective average county yields and average multi county yields for selected eastern Arkansas counties. The study used simulation to evaluate stochastic ARC-CO payments generated by multicounty yield for 2014, 2015, and 2016 for four major corn and soybeans producing regions of Grand Prairie, White River, Upper Delta and Lower Delta regions in Arkansas. Multivariate empirical distributions of multi county yields, and prices were simulated. The likelihood of receiving ARC-CO payment under multicounty yield was more than 60, 27, and 29 percent for Corn, Irrigated Soybean and Non Irrigated Soybean based on our simulated results. The multicounty yield had an ARC-CO payment for all regions. However, individual county payment were less for corn in Grand Prairie and other regions. ARC-CO payment for irrigated soybeans and non-irrigated soybean fluctuated from year to year with highest payment at individual county level for 2014.

Suggested Citation

  • Mane, Ranjitsinh & Watkins, Bradley, 2018. "Stochastic Analysis of County and Multi County Yields for Agriculture Risk Coverage (ARC) payments for Arkansas Row Crop Producers," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266698, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea18:266698
    DOI: 10.22004/ag.econ.266698
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    2. Barry K. Goodwin, 2009. "Payment Limitations and Acreage Decisions under Risk Aversion: A Simulation Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 19-41.
    3. Barry J. Barnett & Dmitry V. Vedenov, 2007. "Is There a Viable Market for Area-Based Crop Insurance?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 508-519.
    4. Mario J. Miranda, 1991. "Area-Yield Crop Insurance Reconsidered," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(2), pages 233-242.
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