Hostname: page-component-84b7d79bbc-tsvsl Total loading time: 0 Render date: 2024-08-03T20:20:01.609Z Has data issue: false hasContentIssue false
  • English
  • Français

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
Get access Rights & Permissions [Opens in a new window]

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Gardner, B. L., and Kramer, R. A.. “The U.S. Experience in Crop Insurance Programs.” Crop Insurance for Agricultural Development: Issues and Experience. Ed. Hazell, P., Pomareda, C., and Valdez, A.. Baltimore: Johns Hopkins University Press, 1986. Chapter XII, pp. 195–222.Google Scholar
Hammond, J. S. “Simplifying the Choice Between Uncertain Prospects Where Preference is Nonlinear.” Management Science, 20(1974):1047–1072.CrossRefGoogle Scholar
King, R. P., and Oamek, G. E.. “Risk Management by Colorado Dryland Wheat Farmers and the Elimination of the Disaster Assistance Program.” Amer. J. Agr. Econ., 65(1983):247–255.CrossRefGoogle Scholar
Kramer, R. A., and Pope, R. D.. “Crop Insurance for Managing Risk.” Journal of the American Society of Farm Managers and Rural Appraisers, 46(1981):34–40.Google Scholar
Leatham, D. J. “Assessment of Farm Loan Characteristics in Texas.” Texas Agricultural Experiment Station Miscellaneous Publications MP-1636, 1987.Google Scholar
Lee, W. F., and Djogo, A.. “The Role of Federal Crop Insurance in Farm Risk Management.” Agr. Finance Rev., 44(1984):15–24.Google Scholar
Lovell, A.C., Knight, T. O., and Richardson, J. W.. “Yield Risk Management and the Multi-Peril Crop Insurance Decision.” Texas Agricultural Extension Service, Food and Fiber Economics ECO, Vol. 14, No. 2, March 1985.Google Scholar
McCarl, B. A. “Preference Among Risky Prospects Under Constant Risk Aversion.” Unpublished manuscript, Dept. of Agricultural Economics, Texas A&M University, 1987.Google Scholar
McCarl, B. A., and Bessler, D. B.. “When the Applicable Utility Function is Unknown. What Range Should the Pratt Risk Aversion Parmeter Fall Into?” Unpublished manuscript, Dept. of Agricultural Economics, Texas A&M University, 1985.Google Scholar
Perry, G. M., Rister, M. E., Richardson, J. W., and Leatham, D. J.. “The Effects of Equity Positions, Credit Policy, and Capital Gains on Farm Survival.” Agr. Finance Rev., 45(1985):58–71.Google Scholar
Pflueger, B. W., and Barry, P. J.. “Crop Insurance and Credit: A Farm Level Simulation Analysis.” Agr. Finance Rev., 46(1986):1–14.Google Scholar
Richardson, J. W., Lemieux, C. M., and Nixon, C. J.. “Entry into Farming: The Effects of Leasing and Leverage on Firm Survival.” So. J. Agr. Econ., 15, 2(1983):139–145.Google Scholar
Richardson, J. W., and Nixon, C. J.. “The Firm Level Income Tax and Farm Policy Simulator: FLIPSIM V.” Texas Agricultural Experiment Station Bulletin B-1528, 1986.Google Scholar