Modeling Crop prices through a Burr distribution and Analysis of Correlation between Crop Prices and Yields using a Copula method

Hernan A. Tejeda and Barry Goodwin ()

No 6061, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: The U.S. crop insurance program has major policy implications in terms of resource allocations, with government subsidies playing a major role. Efficient implementation of crop revenue insurance contracts requires accurate measures of risk for both crop prices and yields. In addition, rating methods are to consider the natural hedge between prices and yields. Empirical evidence shows that crop prices tend to be positively skewed with fat tails. This paper analysis is two-fold. It first studies crop prices using a Burr distribution, with parameters that capture skewness and kurtosis (fat tails), providing a better fit than current normal or log-normal distributions being used. It then uses a copula method to measure the correlation between crop prices and yields, for the study of crop revenue insurance. Results indicate a smaller probability of payout than present methods being used, having direct implications on the design and rating of crop and revenue insurance contracts.

Keywords: Crop Production/Industries; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 39
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://ageconsearch.umn.edu/record/6061/files/sp08te01b.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea08:6061

DOI: 10.22004/ag.econ.6061

Access Statistics for this paper

More papers in 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().