How U.S. Farm Programs and Crop Revenue Insurance Affect Returns to Farm Land

Allan Gray (), Michael D. Boehlje, Brent A. Gloy and Stephen P. Slinsky

Review of Agricultural Economics, 2004, vol. 26, issue 2, 238-253

Abstract: A simulation model incorporating price and yield variability is used to examine the impact of government farm program and crop revenue coverage (CRC) insurance payments on the probability distribution of returns to land. Results indicate that Marketing Loan Program payments have the greatest impact on both the mean and standard deviation of returns. Agricultural Market Transition Act payments shift the distribution of returns without changing the variability, creating a reduction in relative risk. Market loss assistance payments increase the mean, reduce variability, and increase skewness. When combined, farm programs substantially increase the value that risk-averse producers place on the residual returns to land and substantially reduce the certainty equivalent value of CRC. Copyright 2004, Oxford University Press.

Date: 2004
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