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

Published online by Cambridge University Press:  15 September 2016

Paul D. Mitchell  and
Thomas O. Knight
Paul D. Mitchell
Affiliation:
Department of Agricultural and Applied Economics at the University of Wisconsin-Madison in Madison, Wisconsin
Thomas O. Knight
Affiliation:
Department of Agricultural and Applied Economics at Texas Tech University in Lubbock, Texas
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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.

Keywords

crop insurancearea-wide coverageactual production history (APH)group risk plan (GRP)yield distribution
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 37 , Issue 1 , April 2008 , pp. 117 - 131
Copyright
Copyright © 2008 Northeastern Agricultural and Resource Economics Association 

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