Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments

Dmitry Vedenov and Gabriel Power

Journal of Agricultural and Applied Economics, 2008, vol. 40, issue 2, 17

Abstract: Government farm support programs such as Loan Deficiency Payments (LDP) and Counter-Cyclical Payments (CCP) have payoff structures that effectively make them costless price insurance instruments. A combination of these payments with yield insurance may provide a viable alternative to revenue insurance. This paper finds that, contrary to expectations, the revenue product analyzed is uniformly superior to yield insurance under both current (2002) and proposed (2008) Farm Bill structures of government payments. Given minor adjustments, however, yield insurance combined with government payments can provide more effective risk management than revenue insurance in production areas with low yield–price correlation.

Keywords: Agribusiness; Agricultural and Food Policy; Crop Production/Industries (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (8)

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Journal Article: Risk-Reducing Effectiveness of Revenue versus Yield Insurance in the Presence of Government Payments (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:joaaec:46982

DOI: 10.22004/ag.econ.46982

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