Comparative Analysis of Producer Welfare Benefits of Yield Substitution and Yield Exclusion

Shyam Adhikari and Kishor Luitel

No 235567, 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts from Agricultural and Applied Economics Association

Abstract: Farm Bill 2014 introduced yield exclusion option to exclude the catastrophic year yield from APH yield to mitigate its impact on lowering the insurance guarantee. With high prevalence of yield substitution for the low yield; yield exclusion offers another option for producers to choose to enhance their welfare. We take the case of two crops and counties with different risk profile and conducted a comparative analysis on welfare gain by these two options for yield and revenue protection insurance. Our analysis suggests that the yield exclusion provides the higher welfare gain to the producer and likely to replace yield substitution. However, yield substitution is still a valid option when yield exclusion does not change the effective coverage level enormously.

Keywords: Agricultural and Food Policy; Agricultural Finance; Farm Management; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 14
Date: 2016-06-24
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea16:235567

DOI: 10.22004/ag.econ.235567

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