Implications of Commodity Programs and Crop Insurance Policies for Wheat Producers
Date
2019
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Abstract
We analyze the effects of Price Loss Coverage (PLC), Agriculture Risk Coverage (ARC), individual revenue protection insurance (RP), and Supplemental Coverage Option (SCO) on the RP coverage level, certainty equivalent, and program payments. The model is calibrated to a representative wheat farm in Mitchell County in Kansas to analyze the effects of various policies. The result highlights that when insurance is framed as an investment, cumulative prospect theory predicts farmers' coverage decisions accurately at 70%. ARC or PLC program increases the RP coverage level to 75%, but PLC and SCO jointly decrease the RP coverage level to 70%.
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© The Author(s) 2019. cc-by-nc-nd
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Keywords
Commodity programs, cumulative prospect theory, farm bill, insurance policies, wheat
Citation
Luckstead, J., & Devadoss, S.. 2019. Implications of Commodity Programs and Crop Insurance Policies for Wheat Producers. Journal of Agricultural and Applied Economics, 51(2). https://doi.org/10.1017/aae.2018.32