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

Date

2008-04

Authors

Knight, Thomas
Mitchell, Paul

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Volume Title

Publisher

Agricultural and Resource Economics Review

Abstract

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.

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Citation

Mitchell, P., T. Knight. "Economic Analysis of Supplemental Deductible Coverage as Recommended in the USDA's 2007 Farm Bill Proposal." Agricultural and Resource Economics Review, 37 (1, April 2008): 117-131.