Farmers' Preferences for Crop Insurance Attributes

Utilizing survey data from corn and soybean farmers in the Midwest, this study assesses the relative importance of different features of crop insurance products. Conjoint analysis results indicate that farmers' preferences for flexibility dominate both type of insurance and coverage level. Revenue insurance demand is greater by those who are larger, younger, and farm in more separate locations. Results are significant and consistent by size, insurance usage, leverage, and risk perception. The results permit prediction of market shares of competing insurance products within specific producer segments, and thus also provide guidance for targeting specific producer groups with new product configurations.     

Price and Profit: Investigating a Conundrum

Corn and soybean prices do not differ significantly among farms participating in the Illinois farm business farm management (FBFM) program from 1996 through 2005. While consistent with the literature, the finding is inconsistent with farmers' opinion of the importance of price. A conundrum exists. However, the study also finds that price and profit per acre are positively related when a given farm is examined over time. Thus, the conundrum can be explained as a difference in perspective: researchers examine variation between price and profit across farms at a point in time while farmers examine this variation within his/her farm over time. Nevertheless, the relationship a farmer observes is likely due to market supply and demand factors, not the farmer's managerial control over the price received.     

Factors influencing producers' perceptions about the importance of government support programmes in agriculture: application of a semi-parametric ordered response model

This article examines factors affecting producers’ perceptions towards the relative importance of government support programmes in agriculture. Specific attention is placed on determining the effect of crop insurance usage on farmers’ views about the importance of government programme payments. Results from a semi-parametric ordered response model shows that producers who use yield- or revenue-based crop insurance products also tend to view government programmes with higher importance, suggesting that crop insurance and direct government support programmes tend to be complements rather than substitutes.     

Factors Influencing Farmers' Crop Insurance Decisions

Farmers' decisions to purchase crop insurance and their choices among alternative products are analyzed using a two-stage estimation procedure. The influences of risk perceptions, competing risk management options, as well structural and demographic differences are evaluated. The likelihood for crop insurance usage is found to be higher for larger, older, less tenured, more highly leveraged farms, and by those with higher perceived yield risks. The marginal effects of size, age, perceived yield risk, perceived importance of risk management activities, and other structural and demographic variables are identified in terms of their influences on choices among alternative crop insurance products.     

A Spatial Econometric Analysis of Loss Experience in the U.S. Crop Insurance Program

Patterns in loss‐ratio experience in the U.S. corn insurance market are investigated with a spatial econometric model. The results demonstrate systematic geographically related misratings and provide estimates of the impacts of several observable factors on the magnitude of misrating in the program. The model is used to estimate actuarial cross‐subsidizations across the primary corn‐producing states and counties. The impacts of the primary factors are substantial, resulting in net premium transfers of approximately 26 percent of total premiums annually. The misratings likely have important insurance demand, welfare, and land‐use implications.     

Crop Insurance Valuation under Alternative Yield Distributions

Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternative yield distribution specifications on crop insurance valuation has not been well documented. The results of this study demonstrate that large differences in expected payouts from popular crop insurance products can arise solely from the parameterization chosen to represent yield distributions. The results suggest that the frequently unexamined yield distribution specification may lead to economically significant errors in crop insurance policy rating and assessment of expected payouts from policies.