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Dual use insurance for annual forage producers: comparing risk management alternatives.
- Source :
-
Agricultural Finance Review . 2023, Vol. 83 Issue 3, p437-452. 16p. - Publication Year :
- 2023
-
Abstract
- Purpose: The purpose of this paper is to evaluate the Dual Use (DU) Option – a crop insurance policy created by the 2018 Farm Bill – relative to other policies available to dual-purpose annual forage producers. The new policy combines existing rainfall-based policies for annual forage crops and multi-peril policies for grain, allowing coverage for multiple crop uses on the same acres during the same growing season. Design/methodology/approach: The paper uses a simulation model to examine crop insurance choices for a typical Texas dual-purpose wheat farm. The certainty equivalent (CE) of wealth is used to rank choices within and between three insurance plans and to analyze the effects of those choices over a range of producer risk aversion levels and for three cases of yield expectations. Findings: The DU Option is more preferred as risk aversion increases, but it is not universally preferred. Therefore, while the policy can be a viable risk management tool, certain restrictions may be limiting its effectiveness. Practical implications: The findings of this paper can help explain farm-level decision making related to dual-purpose annual forage crop insurance program choices. Originality/value: This paper contributes to the literature by documenting a new crop insurance program made available in the 2018 Farm Bill and provides insights into producers' possible choices by evaluating extensive scenarios. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00021466
- Volume :
- 83
- Issue :
- 3
- Database :
- Academic Search Index
- Journal :
- Agricultural Finance Review
- Publication Type :
- Academic Journal
- Accession number :
- 164083410
- Full Text :
- https://doi.org/10.1108/AFR-08-2022-0096