Essays on crop insurance choices in the agricultural act of 2014 for cotton farmers

The Agricultural Act of 2014 present’s new crop insurance policies decision for cotton farmers. The objective of the study is to understand the impact of new crop insurance policy options for the cotton farmer decision regarding risk management strategies within and across two different farm policy regimes. This study analyzes farmers risk management decision behaviors through a simulation approach and a stated preference approaches. Some of the new policies in the Agricultural Act of 2014 are ability to differentiate insurance product and coverage level for irrigated and non- irrigated, shallow loss insurance products and Yield Exclusion. These new policies helps farmers to manage their agricultural production risk more specifically; however, this increase policies choices may also make the insurance decision making process more complex. This study suggests that the optimal underlying insurance policy is the Revenue Protection at a 75% coverage level. This optimal choice is the same for both high and low productive farms, even with the Yield Exclusion. However, Yield Exclusion increases the per acres benefit when enrolled in any insurance products and coverage levels. The advantages of shallow loss insurance are mostly in higher coverage level and the ability to assess the expected county yield and farm yield. Over the coming years, farmers will efficiently assess these factors and utilize the benefits of shallow loss insurance and Yield Exclusion. Even though this study suggests there is a difference in the coverage level choice for irrigate and non-irrigated cotton, in coming years it will be clearer as we get more information. Due to the complexity of the new insurance policy, there should be awareness program for farmers to help them participate and understand the policy.