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Budgetary and Resource Allocation Effects of Revenue Assurance
01 Feb 1995-American Journal of Agricultural Economics (Center for Agricultural and Rural Development (CARD) at Iowa State University)-
TL;DR: In this paper, the efficiency of redistribution and the level of government costs of revenue assurance are compared with current farm programs, and the results suggest that a revenue assurance program using a fixed base acreage and actual or county average yields to ensure whole farm revenues could provide a significant improvement over existing policies.
Abstract: The efficiency of redistribution and the level of government costs of revenue assurance are compared with current farm programs. The results suggest that a revenue assurance program using a fixed base acreage and actual or county average yields to ensure whole farm revenues could provide a significant improvement over existing policies. Revenue assurance would affect producer welfare somewhat, but would significantly reduce government expenditures.
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TL;DR: In this article, the authors survey a substantial body of agricultural economics literature that has examined issues relating to the Multiple Peril Crop Insurance (MPCI) program and give an assessment of research findings along with suggested directions for future research.
Abstract: Since 1980, the Multiple Peril Crop Insurance (MPCI) program has occupied a prominant role in U.S. farm policy. MPCI coverage offerings have been greatly expanded to try to effectively substitute for other forms of federal crop disaster assistance. In this paper, we survey a substantial body of agricultural economics literature that has examined issues relating to the MPCI program. We give an assessment of research findings along with suggested directions for future research.
167 citations
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TL;DR: In this paper, the authors examined optimal futures and put ratios in the presence of four alternative crop insurance coverages, including revenue insurance, yield insurance, crop crop insurance, and crop crop revenue insurance.
Abstract: New types of crop insurance have expanded the tools from which crop producers may choose to manage risk. Little is known regarding how these products interact with futures and options. This analysis examines optimal futures and put ratios in the presence of four alternative insurance coverages. An analytical model investigates the comparative statics of the relationship between hedging and insurance. Additional numerical analysis is conducted which incorporates futures price, basis, and yield variability. Yield insurance is found to have a positive effect on hedging levels. Revenue insurance tends to result in slightly lower hedging demand than would occur given the same level of yield insurance coverage.
160 citations
TL;DR: In this paper, the authors evaluate farm, household, and financial characteristics of cash grain farmers' decisions of whether to purchase revenue insurance using farm-level data and find that older and wealthy farmers are less likely to buy revenue insurance.
Abstract: The objective of this study is to evaluate farm, household, and financial characteristics of cash grain farmers’ decisions of whether to purchase revenue insurance. Using farm-level data these characteristics were identified by estimating a logit model of revenue insurance purchase decisions by farm operators. Results indicate that farm operators with the ability to self-insure through accumulation of sufficient wealth reserves measured in terms of the ratio of debts-to-assets, operators with off-farm income, and participation in production and marketing contracts, are more likely to pursue these strategies as a substitute for federal revenue insurance programmes. Further, study finds that older and wealthy cash grain farmers are less likely to buy revenue insurance.
50 citations
TL;DR: In this paper, the coupling effect of expectations about base acreage and yield updating in future farm policy on production decisions in the presence of price, yield, and policy uncertainty for a risk-averse farmer producing a single crop was analyzed.
Abstract: We analyze the coupling effect of expectations about base acreage and yield updating in future farm policy on production decisions in the presence of price, yield, and policy uncertainty for a risk-averse farmer producing a single crop. The farmer receives market revenue and government payments. Using stochastic dynamic programming, optimum decisions under present value calculations positively link current acreage and fertilizer decisions to future government payments through expected updates of base acreage and yield in the future regime. Moving from a zero probability of updating to a probability of one increases optimum acreage and yield by 6.25% and 0.134%, respectively. Copyright 2010, Oxford University Press.
43 citations
TL;DR: In this article, the authors compared a procedure by lman and Conover (IC) that is common in actuarial applications to a new technique detailed by Phoon, Quek, and Huang (PQHl) for rating a whole-farm insurance product.
Abstract: Alternative techniques for representing dependencies among variables in multivariate simulation are discussed and compared in the context of rating a whole-farm insurance product. A procedure by lman and Conover (IC) that is common in actuarial applications is compared to a new technique detailed by Phoon, Quek, and Huang (PQHl. Results suggest that rates derived from the IC procedure may be inaccurate because the procedure produces biased estimates of correlation between simulated variables. This situation is improved with the PQH procedure.
34 citations