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Implications of Crop Insurance for Farmers and Lenders

Published online by Cambridge University Press:  05 September 2016

David J. Leatham ,
Bruce A. McCarl  and
James W. Richardson
David J. Leatham
Affiliation:
Department of Agricultural Economics, Texas A&M University
Bruce A. McCarl
Affiliation:
Department of Agricultural Economics, Texas A&M University
James W. Richardson
Affiliation:
Department of Agricultural Economics, Texas A&M University
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Abstract

The effect of the farmer's choice of crop insurance was evaluated on both the farmer's and lender's performance. This was done using whole-farm, Monte Carlo simulation for Texas wheat/sorghum operations. Results indicate crop insurance would be preferred by moderately risk-averse farmers when farm firm failure became an issue or the insurance loss ratio approached one. A lender always preferred the use of crop insurance, especially when the probability of firm bankruptcy was an issue.

Keywords

crop insurancerisk managementsimulationfarmers' perspectivelenders' perspective
Type
Submitted Articles
Information
Journal of Agricultural and Applied Economics , Volume 19 , Issue 2 , December 1987 , pp. 113 - 120
Copyright
Copyright © Southern Agricultural Economics Association 1987

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