Implications of Commodity Programs and Crop Insurance Policies for Wheat Producers

Jeff Luckstead, Stephen Devadoss

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

We analyze the effects of Price Loss Coverage (PLC), Agriculture Risk Coverage (ARC), individual revenue protection insurance (RP), and Supplemental Coverage Option (SCO) on the RP coverage level, certainty equivalent, and program payments. The model is calibrated to a representative wheat farm in Mitchell County in Kansas to analyze the effects of various policies. The result highlights that when insurance is framed as an investment, cumulative prospect theory predicts farmers' coverage decisions accurately at 70%. ARC or PLC program increases the RP coverage level to 75%, but PLC and SCO jointly decrease the RP coverage level to 70%.

Original languageEnglish
Pages (from-to)267-285
Number of pages19
JournalJournal of Agricultural and Applied Economics
Volume51
Issue number2
DOIs
StatePublished - May 1 2019

Keywords

  • Commodity programs
  • cumulative prospect theory
  • farm bill
  • insurance policies
  • wheat

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