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Linkages Between Crop Insurance and Pre-Harvest Hedging

Published online by Cambridge University Press:  28 April 2015

Kevin C. Dhuyvetter  and
Terry L. Kastens
Kevin C. Dhuyvetter
Affiliation:
Department of Agricultural Economics, Kansas State University
Terry L. Kastens
Affiliation:
Department of Agricultural Economics, Kansas State University
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Abstract

The impact pre-harvest hedging and crop insurance strategies have on expected revenue and associated risk as well as how producers' risk attitudes affect optimal strategies was analyzed for Kansas wheat farms. No insurance, Catastrophic (CAT), Actual Production History (APH), and Crop Revenue Coverage (CRC) were considered. Average revenue was similar across alternatives, but APH and CRC resulted in the least income variability. Risk reduction effects of hedging were small and the advantage of CRC over APH decreases as hedging increases. This historical study provides useful information; however, if future market conditions differ significantly from the past, optimal strategies may change.

Keywords

crop insurancehedgingrevenue insurancerisk management
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 31 , Issue 1 , April 1999 , pp. 41 - 56
Copyright
Copyright © Southern Agricultural Economics Association 1999

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