Designing farm supplemental revenue coverage options on top of crop insurance coverage

2014 ◽  
Vol 74 (3) ◽  
pp. 397-426 ◽  
Author(s):  
Harun Bulut ◽  
Keith J. Collins
Keyword(s):  
Simulation Analysis ◽  
Crop Insurance ◽  
Insurance Coverage ◽  
Current Data ◽  
Dependence Structure ◽  
Insurance Plan ◽  
Management Tools ◽  
High Coverage ◽  
Farm Bill ◽  
Content Type

Purpose – The purpose of this paper is to use simulation analysis to assess farmer choice between crop insurance and supplemental revenue options as proposed during development of the Agricultural Act of 2014. Design/methodology/approach – The certainty equivalent of wealth is used to rank farm choices and assess the effects of supplemental revenue options on the crop insurance plan and coverage level chosen by the producer under a range of farm attributes. The risk-reducing effectiveness of the select programs is also examined through their impact on the farm revenue distribution. The dependence structure of yield and prices is modeled by applying copula techniques on historical data. Findings – Farm program supplemental revenue programs generally have no effect on crop insurance choices. Crop insurance supplemental revenue programs typically reduce crop insurance coverage at high coverage levels. An individual plan of crop insurance combined with a supplemental revenue insurance plan may substitute for incumbent area crop insurance plans. Originality/value – The analysis provides insights into farmers’ possible choices by focussing on alternative crops and farm attributes and extensive scenarios, using current data, crop insurance plans and programs contained in the 2014 Farm Bill and related bills. The results should be of value to policy officials and producers in regards to the design and use of risk management tools.

The effects of overconfident yield forecasting on cross-coverage level crop insurance demand

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Clayton P. Michaud
Keyword(s):  
Crop Insurance ◽  
Insurance Coverage ◽  
Coverage Level ◽  
Insurance Demand ◽  
Management Tools ◽  
Content Type ◽  
Revenue Insurance ◽  
Yield Risk ◽  
Yield Forecasting ◽  
Yield Insurance

PurposeThis paper examines the effect of overconfident yield forecasting (optimism bias) on crop insurance coverage level choices across both yield and revenue insurance.Design/methodology/approachThis study simulates a representative producer’s preferred coverage level for both yield and revenue insurance under three potential models of decision-making and four potential manifestations of overconfident yield forecasting. The study then uses this framework to examine how coverage level choices change as overconfidence increases (decreases).FindingsAs overconfidence increases, producers prefer lower levels of crop insurance coverage than they would otherwise prefer, with extreme overconfidence inducing farmers to buy no insurance at all. While overconfidence affects cross-coverage demand for revenue and yield insurance similarly, this effect is more pronounced for yield insurance. Cross-coverage level demand for revenue insurance is relatively stable across changes in the correlation between prices and yields.Practical implicationsThis research has important implications for crop insurance subsidy design and crop insurance demand modeling.Originality/valueThere is a growing body of literature suggesting that producers are overconfident with regard to their future yield risk and that this bias reduces their willingness to pay for risk management tools such as crop insurance. This is the first study to look at how such overconfidence affects cross-coverage level demand for crop insurance.

scholarly journals The impact of enterprise unit policy change on the quantity demanded for crop insurance

2020 ◽  
Vol 80 (4) ◽  
pp. 507-527
Author(s):  
Harun Bulut
Keyword(s):  
Policy Change ◽  
Crop Insurance ◽  
Management Tools ◽  
High Coverage ◽  
Content Type ◽  
Time Path ◽  
Unit Structure ◽  
Catastrophic Coverage ◽  
Economic Regions ◽  
The Impact

PurposeThe article examines the impact of policy change on enterprise unit subsidies that took place in 2009 on the quantity demanded for crop insurance.Design/methodology/approachThe analysis covers corn, soybeans, and wheat that are grown in six economic regions and uses various measures of purchasing such as acres insured, unit structure, coverage levels, as well as crop hail use as proxies for the quantity demanded.The analysis first employs time series econometric tools to analyze whether the time path of the share of enterprise units within buyup acres is influenced by the policy change in enterprise unit subsidies. It then comparatively examines the insurance experience between 2008 (right before the change) and 2015 (well after the change).FindingsFor corn, soybean, and wheat, the analysis establishes that the time path of the share of enterprise units within buyup coverage acres is statistically and economically influenced by the intervention. The analysis further quantifies the intervention's immediate and long-term impacts and finds that farmers' unit choices are highly responsive (elastic) to subsidy rates in those units.Between 2008 and 2015, the insurance experience generally indicates that the share of enterprise units within buyup coverage surged, the share of acres under catastrophic coverage declined, and the share acres in high coverage levels increased. Meanwhile, growers have increasingly utilized crop-hail policies.Originality/valueThis appears to be the first study (1) quantifying the sensitivity of farmers' unit choices with respect to subsidy rates in those units and finding that such choices are actually highly responsive (elastic), and (2) pointing out the interaction between MPCI and crop-hail products and offering insights as to their combined use. The findings should be of considerable value to policymakers, academics, bankers, and producers in regards to the design and use of risk management tools.

US farmers’ insurance choices under budget heuristics

2018 ◽  
Vol 78 (1) ◽  
pp. 152-172 ◽  
Author(s):  
Harun Bulut
Keyword(s):  
Regional Differences ◽  
Simulation Analysis ◽  
Crop Insurance ◽  
Expected Utility Theory ◽  
Budget Constraint ◽  
Policy Implications ◽  
Future Research ◽  
Revealed Preferences ◽  
Management Tools ◽  
Content Type

Purpose Regional differences in crop insurance uptake have persisted over time. To partly explain this phenomenon, the purpose of this paper is to propose and evaluate a budget constraint (heuristic) effect within the standard expected utility theory (EUT) framework through simulation methods. Design/methodology/approach Within the EUT framework, a standard simulation model is used to gain insights into farm insurance decisions when a budget constraint is in effect. The budget constraint is modeled as it has been revealed through the data on farmers’ insurance expenditures. In the simulation analysis, certainty equivalent values are used to rank farm options subject to the revealed budget constraint. Findings A budget constraint effect within the EUT framework stands out in explaining the observed regional differences. The proposed explanation is consistent with the historical trends on the ratio of crop insurance expenditure to expected crop value, higher premium rates in regions with lower crop insurance uptake, and the limited turnout for the 2014 Farm Bill’s supplemental area-based crop insurance products. Farmers’ crop insurance choices are found to be mostly constrained-optimal. Originality/value This appears to be the first study taking the revealed preferences approach to farmers’ crop insurance choices in a simulation analysis. Some policy implications are drawn and future research avenues are suggested. The findings should be of considerable value to policymakers, academics, bankers, and producers in regard to the design and use of risk management tools.

Challenges in the design of crop revenue insurance

2015 ◽  
Vol 75 (1) ◽  
pp. 19-30 ◽  
Author(s):  
Barry K. Goodwin
Keyword(s):  
Crop Insurance ◽  
Commodity Prices ◽  
Original Research ◽  
Farm Bill ◽  
Content Type ◽  
Insurance Program ◽  
Revenue Insurance ◽  
Research Questions ◽  
Production Practices ◽  
Recent Policy

Purpose – The federal crop insurance program has become the cornerstone of US agricultural policy. Since its introduction in the mid-1990s, crop revenue insurance has grown in prominence and now represents nearly 90 percent of liability for major crops. The pricing and design of revenue insurance raises a number of important challenges. The 2014 Farm Bill brought about several important changes in the program, resulting in a moving target for analysts and researchers. The paper aims to discuss these issues. Design/methodology/approach – The risks are of a multivariate nature and are likely to be highly dependent on one another. The crop insurance setting is also constantly changing, with technological changes in production practices and highly volatile commodity prices. Compounding these challenges is the fact that US policymakers continually change the program. Findings – The program has indeed undergone many changes and a number of important research questions need to be addressed. Originality/value – Original research based upon recent policy.

scholarly journals Discussion: What Have We Learned from the New Suite of Risk Management Programs of the Food, Conservation, and Energy Act of 2008?

2010 ◽  
Vol 42 (3) ◽  
pp. 537-541 ◽  
Author(s):  
Bradley D. Lubben ◽  
James L. Novak
Keyword(s):  
Risk Management ◽  
Crop Insurance ◽  
Management Decision ◽  
Management Tools ◽  
Farm Bill ◽  
Integrated Risk ◽  
Farm Programs ◽  
Management Decision Making ◽  
Fundamental Shift ◽  
Effective Analysis

New revenue-based support programs in the 2008 Farm Bill represent a fundamental shift in farm programs and risk management decision-making. However, complexity, uncertainty, economics, and, arguably, an incomplete analysis of the new Average Crop Revenue Election (ACRE) program all contributed to low enrollment in the new program in 2009. An effective analysis of ACRE should consider farm programs as part of an integrated risk management portfolio, including crop insurance, marketing, and other risk management tools as opposed to a separate lottery program. Improving this integration could be one of the most significant consequences of the 2008 Farm Bill.

scholarly journals Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal

2008 ◽  
Vol 37 (1) ◽  
pp. 117-131
Author(s):  
Paul D. Mitchell ◽  
Thomas O. Knight
Keyword(s):  
Economic Analysis ◽  
Systemic Risk ◽  
Crop Insurance ◽  
Insurance Coverage ◽  
Yield Potential ◽  
High Yield ◽  
Farm Bill ◽  
Certainty Equivalents ◽  
The Individual ◽  
High Yield Potential

A primary change to crop insurance contained in the USDA's Farm Bill proposal is supplemental deductible coverage (SDC). SDC would allow farmers who purchase individual crop insurance coverage to purchase area-wide coverage in the amount of the individual policy deductible. This supplemental area-wide coverage would be similar to the existing Group Risk Plan policy, but with an accelerated indemnity schedule. Analysis indicates that SDC increases farmer certainty equivalents. The largest benefits are realized by farmers with high yield potential in counties with greater systemic risk. In general, optimal individual policy coverage levels modestly decrease when SDC is taken.

scholarly journals Evaluating the marginal risk management benefits of the supplemental coverage option

2016 ◽  
Vol 76 (3) ◽  
pp. 411-424 ◽  
Author(s):  
Nicholas Paulson ◽  
Gary Schnitkey ◽  
Patrick Kelly
Keyword(s):  
Risk Management ◽  
Risk Aversion ◽  
Expected Utility ◽  
Crop Insurance ◽  
Policy Debate ◽  
Farm Bill ◽  
Content Type ◽  
Farm Level ◽  
Insurance Program ◽  
Program Choice

Purpose The purpose of this paper is to evaluate the risk management benefits provided by the supplemental coverage option (SCO) insurance plan which was created in the 2014 Farm Bill. Specifically, the marginal expected utility benefits are compared with the potential additional subsidy cost introduced by the new program for a stylized example of a corn producer. Design/methodology/approach The paper uses a stylized simulation model examines the preferred insurance program choice for a typical Midwestern corn farmer. The expected utility of the farmer is calculated under their preferred insurance program choice both with and without the availability of the SCO program, and compared to the case where crop insurance is not available. Scenarios are examined for a range of farmer risk aversion levels, different levels of correlation between farm-level and county-level corn yields, and case with and without insurance premium subsidies. Findings The SCO program is found to enter into the preferred insurance program choice for risk averse farmers. As risk aversion increases, farmers are estimated to prefer higher coverage levels for individual products along with SCO coverage. While the availability of existing crop insurance programs are shown to substantially increase the expected utility of farmers, the marginal impact of adding SCO to the crop insurance program is relatively small. Furthermore, the additional expected benefits generated by SCO are shown to include both risk management and expected return components. With subsidies removed, the estimated marginal benefits provided by SCO are reduced significantly. Practical implications The findings of this paper can help inform the policy debate for future farm bills as agricultural support programs continue to evolve. The results in this paper can also be used to help explain farm-level decision making related to crop insurance program choices. Originality/value This paper contributes to the literature by documenting a new, federally supported risk management programs made available to farmers in the 2014 Farm Bill and evaluates the marginal benefits the SCO program offers US crop producers.

scholarly journals Crop Insurance, Land Productivity and the Environment: A Way forward to a Better Understanding

Agriculture ◽  
2021 ◽  
Vol 11 (11) ◽  
pp. 1108
Author(s):  
Agnieszka Kurdyś-Kujawska ◽  
Agnieszka Sompolska-Rzechuła ◽  
Joanna Pawłowska-Tyszko ◽  
Michał Soliwoda
Keyword(s):  
Agricultural Policy ◽  
Crop Insurance ◽  
Insurance Coverage ◽  
Land Productivity ◽  
Negative Effects ◽  
Management Tools ◽  
Productivity Level ◽  
Average Value ◽  
Important Challenge ◽  
The Relationship

Providing farmers with effective risk management tools and increasing the productivity of factors of production, while limiting negative effects on the environment, is an important challenge for the current EU agricultural policy. The aim of this research is to identify and evaluate the relationship between crop insurance and land productivity in the context of environmental effects. The study covered farms with crop insurance participating in the Polish FADN system. The article uses the TOPSIS method of organizing objects. We classify farms in terms of land productivity and examine the relationship between these results and the value of insurance coverage. In our conceptual and empirical framework, we recognize that there is a mutual relationship between crop insurance, land productivity and the environment. Our empirical results show that the level of insurance coverage may support the increase in land productivity, indirectly affecting the environment. Farms with the highest productivity level were characterized by an average value of insurance that was double that compared to farms with the lowest productivity level.

Use of Basu-Dhar bivariate geometric distribution in the analysis of the reliability of component series systems

2019 ◽  
Vol 36 (4) ◽  
pp. 569-586
Author(s):  
Ricardo Puziol Oliveira ◽  
Jorge Alberto Achcar
Keyword(s):  
Bayesian Approach ◽  
Geometric Distribution ◽  
Bivariate Distribution ◽  
Dependence Structure ◽  
Series System ◽  
Engineering Applications ◽  
Data Set ◽  
Content Type ◽  
Bivariate Geometric Distribution ◽  
Series Systems

Purpose The purpose of this paper is to provide a new method to estimate the reliability of series system by using a discrete bivariate distribution. This problem is of great interest in industrial and engineering applications. Design/methodology/approach The authors considered the Basu–Dhar bivariate geometric distribution and a Bayesian approach with application to a simulated data set and an engineering data set. Findings From the obtained results of this study, the authors observe that the discrete Basu–Dhar bivariate probability distribution could be a good alternative in the analysis of series system structures with accurate inference results for the reliability of the system under a Bayesian approach. Originality/value System reliability studies usually assume independent lifetimes for the components (series, parallel or complex system structures) in the estimation of the reliability of the system. This assumption in general is not reasonable in many engineering applications, since it is possible that the presence of some dependence structure between the lifetimes of the components could affect the evaluation of the reliability of the system.

Performance management in public universities: overcoming bureaucracy

2018 ◽  
Vol 67 (4) ◽  
pp. 736-753 ◽  
Author(s):  
Nunzio Angiola ◽  
Piervito Bianchi ◽  
Letizia Damato
Keyword(s):  
Performance Management ◽  
Public Universities ◽  
Organizational Factors ◽  
Public University ◽  
Management Systems ◽  
Management Tools ◽  
Performance Levels ◽  
Content Type ◽  
Performance Management Systems ◽  
Adoption And Implementation

Purpose Considering a micro performance perspective, the purpose of this paper is to analyze whether and to what extent the adoption of better performance management systems could improve the performance levels of a public university. Design/methodology/approach With reference to a period of four years (2011-2014), the quality of performance management systems of 29 Italian universities (response rate: 48 percent) was examined and the possible effects on performance levels of these institutions were analyzed by means of statistical methodologies (multiple regression analysis). Outcome indicators were considered. Findings The findings indicate the need to go further “measurement,” and to take care of performance “management,” especially in complex organizations as universities, where academicians identify themselves more with their professions than with the organization and where technicians and administrative employees might look at the performance-based reform with “bureaucratic eyes.” A fruitful cooperation between the professional soul and the bureaucratic one is paramount. Originality/value Studies which analyze organizational factors that could affect the adoption and implementation of performance management systems are rare, and use in prevalence qualitative methods or refer to machine bureaucracies, not many to professional ones as public universities. Moreover, the performance management literature in a public university context deepens the topic of the selection of KPIs and the focus is mainly on macro performance or on management tools for gathering and analyzing performance measures.

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