Designing Optimal Crop Revenue Insurance

Designing Optimal Crop Revenue Insurance

When the indemnity schedule is contingent on the farmer’s price and individual yield, an optimal crop revenue insurance contract depends only on the farmer’s gross revenue. However, this design is not efficient if, as is the case with available contracts, the coverage function is based on imperfect estimators of individual yield and/or price. The producer’s degree of prudence and the extent of ...

Crop Revenue and Yield Insurance Demand: A Subjective Probability Approach

Systemic Risk in U.S. Crop and Revenue Insurance Programs

The present study estimates the probability density function of the Federal Risk Management Agency’s (RMA) net income from reinsuring crop insurance for corn, wheat, and soybeans. Based on 1997 data, it is estimated that there is a 5 percent probability that RMA will need to reimburse at least $1 billion to insurance companies, and that the fair value of RMA’s reinsurance services to insurance ...

Hedging Price Risk in the Presence of Crop Yield and Revenue Insurance by

The demand for hedging against price uncertainty in the presence of crop yield and revenue insurance contracts is examined for French wheat farms. The rationale for the use of options in addition to futures is first highlighted through the characterization of the first-best hedging strategy in the expected utility framework. It is then illustrated using numerical simulations. The presence of op...

Are Current Crop and Revenue Insurance Products Meeting the Needs of Texas Cotton Producers

An empirical procedure was developed to analyze the cost effectiveness of alternative crop insurance products in terms of increasing producer net returns and minimizing variation in net returns. Results indicate that CAT was the overwhelmingly preferred MPCI option for all scenarios. The ranking of the other MPCI options was consistently 50/100, 60/100, and 75/100 in all scenarios. The CRC opti...