Implications of Commodity Programs and Crop Insurance Policies for Wheat Producers

Jeff Luckstead and Stephen Devadoss

Journal of Agricultural and Applied Economics, 2019, vol. 51, issue 2, 267-285

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%.

Date: 2019
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