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Almost Ideal Area Yield Crop Insurance Contracts

Published online by Cambridge University Press:  15 September 2016

Vincent H. Smith ,
Hayley H. Chouinard  and
Alan E. Baquet
Vincent H. Smith
Affiliation:
Department of Agricultural Economics and Economics, Montana State University
Hayley H. Chouinard
Affiliation:
Department of Agricultural Economics and Economics, Montana State University
Alan E. Baquet
Affiliation:
Department of Agricultural Economics and Economics, Montana State University
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Abstract

Using yield data for a sample of 123 dryland wheat producers in Montana, the effects of three area yield contracts, including the contract currently offered by the United States Federal Crop Insurance Corporation and two individual yield contracts on individual farm yield variability, are examined. The results indicate that while the Federal Crop Insurance Corporation area yield contract provides all farmers in the sample with some protection against yield variability, a simpler, actuarially equivalent “almost ideal” area yield contract provides substantially larger reductions in yield variability. However, actuarially equivalent individual yield contracts provide levels of protection against yield variability similar to those obtained under the “almost ideal” area yield contract at much lower premiums.

Type
Agricultural, Resource, and Environmental Policies in the 1990s
Information
Agricultural and Resource Economics Review , Volume 23 , Issue 1 , April 1994 , pp. 75 - 83
Copyright
Copyright © 1994 Northeastern Agricultural and Resource Economics Association 

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