Risk Management Strategies for Nebraska Grain and Oilseed Producers: A Stochastic Simulation and Analysis
01 Jan 2012-
About: The article was published on 2012-01-01 and is currently open access. It has received 1 citations till now. The article focuses on the topics: Risk management & Commodity programs.
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TL;DR: In this article, the authors provided an overall evaluation by commodity considering both liquidity and equity measures, and provided a discussion of the overall evaluation of crop farms by commodity, considering both liquidation probability and equity probability.
Abstract: Under the January 2007 Baseline, 20 of the 64 crop farms are considered in good liquidity condition (less than a 25 percent chance of negative ending cash in 2012). Five crop farms have between a 25 percent and a 50 percent likelihood of negative ending cash. The remaining 39 crop farms have greater than a 50 percent chance of negative ending cash. Additionally, 30 of the 64 crop farms are considered in good equity position (less than a 25 percent chance of decreasing real net worth during the study period). Nine crop farms have between a 25 percent and 50 percent likelihood of losing real net worth, and 25 crop farms have greater than a 50 percent probability of decreasing real net worth. The following discussion provides an overall evaluation by commodity considering both liquidity and equity measures.
2 citations
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TL;DR: In this paper, a set of data is defined as a collection of observed values representing one or more characteristics of some objects or units, which can be classified according to a standard measurement scale that goes from strong to weak depending on the amount or precision of information available in the scale.
Abstract: Publisher Summary This chapter defines the components of a dataset, presents tools that are used to describe a dataset, and briefly discusses methods of data collection. A set of data is defined as a collection of observed values representing one or more characteristics of some objects or units. Data are obtained from two broad categories of sources: (1) primary data are collected as part of the study and (2) secondary data are obtained from published sources such as journals, governmental publications, news media, or almanacs. The observations can be classified according to a standard measurement scale that goes from strong to weak depending on the amount or precision of information available in the scale. The nature of the data description and statistical inference is dependent on the type of variable being studied. The ratio scale of measurement uses the concept of a unit of distance or measurement and requires a unique definition of a zero value, whereas the interval scale of measurement also uses the concept of distance or measurement and requires a “zero” point, but the definition of zero may be arbitrary. There are also the ordinal scale and the nominal scale that distinguishes among measurements on the basis of the relative amounts of some characteristic they possess and identifies observed values by name or classification, respectively.
603 citations
TL;DR: One of the more promising proposals for reforming the federal crop insurance program calls for both premium rates and indemnities to be based not on the producer's individual yield but rather on the aggregate yield of a surrounding area as mentioned in this paper.
Abstract: One of the more promising proposals for reforming the federal crop insurance program calls for both premium rates and indemnities to be based not on the producer's individual yield but rather on the aggregate yield of a surrounding area. Area-yield crop insurance can provide more effective yield-loss coverage than individually tailored insurance, without most of the adverse selection and moral hazard problems that have historically undermined the actuarial performance of the federal crop insurance program.
445 citations
TL;DR: The Texas Risk Management Education Program (TRMEP) as mentioned in this paper was created by the Texas Agricultural Extension Service (TEES) to train risk management experts for assessing alternative farm management strategies.
Abstract: Simulation as an analytical tool continues to gain popularity in industry, government, and academics. For agricultural economists, the popularity is driven by an increased interest in risk management tools and decision aids on the part of farmers, agribusinesses, and policy makers. Much of the recent interest in risk analysis in agriculture comes from changes in the farm program that ushered in an era of increased uncertainty. With increased planting flexibility and an abundance of insurance and marketing alternatives farmers face the daunting task of sorting out many options in managing the increased risk they face. Like farmers, decision makers throughout the food and fiber industry are seeking ways to understand and manage the increasingly uncertain environment in which they operate. The unique abilities of simulation as a tool in evaluating and presenting risky alternatives together with an expected increase in commodity price risk, as projected by Ray, et al., will likely accelerate the interest in simulation for years to come. Increased interest in risk management tools for assessing alternative farm management strategies led to the creation of the Texas Risk Management Education Program (TRMEP) by the Texas Agricultural Extension Service. The risk management specialists with TRMEP help
272 citations
TL;DR: In this paper, the adoption of crop insurance, forward contracting, and spreading sales is analyzed using multivariate and multinomial probit approaches that account for simultaneous adoption and/or correlation among the three risk management adoption decisions.
Abstract: Factors affecting the adoption of crop insurance, forward contracting, and spreading sales are analyzed using multivariate and multinomial probit approaches that account for simultaneous adoption and/or correlation among the three risk management adoption decisions. Our empirical results suggest that the decision to adopt crop insurance, forward contracting, and/or spreading sales are correlated. Richer insights can be drawn from our multivariate and multinomial probit analysis than from separate, single-equation probit estimation that assumes independence of adoption decisions. Some factors significantly affecting the adoption of the risk management tools analyzed are proportion of owned acres, off-farm income, education, age, and level of business risks.
214 citations
"Risk Management Strategies for Nebr..." refers background in this paper
...Participation in different hedging activities remains correlated with purchases of crop insurance products (Velandia et al., 2009)....
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TL;DR: In the early 1990s, a regional-level revenue program was analyzed as a way to mitigate the need for supplemental, ad hoc disaster payments (Miranda and Glauber), and more recently, a county level revenue guarantee program has been promoted as providing protection when it is needed while reducing the chances that annual payments would exceed domestic commodity support limits allowed under the World Trade Organization Agreement on Agriculture (Babcock and Hart).
Abstract: O of the purposes of U.S. agricultural programs has been to support or stabilize farm incomes by mitigating the effects of low crop prices and yields. Commodity programs such as the counter-cyclical payment and Marketing Loan programs have provided benefits or made payments to producers of several major field crops when crop prices fall short of expected or target levels. At the same time, the federal crop insurance program has provided support that has focused on yield shortfalls but has increasingly included revenue coverage. Several proposals to reform U.S. commodity programs have received attention in the 2007 farm bill debate (American Farmland Trust; National Association of Corn Growers; USDA). Generally, these proposals would alter or replace commodity price programs with programs that would make payments when revenues, that is, prices multiplied by yields, fall short of expected or target levels (Coble, Dismukes, and Thomas). Interest in revenue as the basis for farm programs is not new. In 1983, a national-level revenue program was studied as a way to control federal outlays for commodity programs (CBO). In the early 1990s, a regional-level revenue program was analyzed as a way to mitigate the need for supplemental, ad hoc disaster payments (Miranda and Glauber). More recently, a county-level revenue guarantee program has been promoted as providing protection when it is needed while reducing the chances that annual payments would exceed domestic commodity support limits allowed under the World Trade Organization Agreement on Agriculture (Babcock and Hart).
42 citations
"Risk Management Strategies for Nebr..." refers background or methods in this paper
...In another sectoral analysis, Coble and Dismukes (2008) outlined potential average payouts from integrating government programs and crop insurance across eligible acres across the United States....
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...…by using Miranda’s formula to expand county yield variability into farm-level variability that generates quoted RMA premium rates Similar to Coble and Dismukes’(2008) procedure, Miranda’s Formula (1991) was used to expand a county yield to a farm-level yield expressing idiosyncratic risk…...
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