Adjusting Crop Insurance APH Calculation to Accommodate Biomass Production

Joseph Dolginow, Raymond E. Massey, Brent Myers and Newell Kitchen

No 156945, 2013 AAEA: Crop Insurance and the Farm Bill Symposium from Agricultural and Applied Economics Association

Abstract: The United States federal government currently subsidizes crop insurance to provide a safety-net to insured farmers. Agricultural economists have debated indirect impacts of the subsidized crop insurance program on producer behavior. One of those debates surrounds the issue of extensiveness, or if crop insurance encourages the production of certain crops for which insurance is more readily available. The federal government is also fostering an emerging cellulosic bioenergy industry with subsidies for planting perennial grass crops like switchgrass and miscanthus. This article analyzes how the current method for calculating actual production history (APH) may deter producers from planting perennial grasses and penalizes those producers who convert some of their row crop land to perennial grasses. An alternative APH calculation method suggested here would continue to provide a safety-net to producers, reduce indemnity payments by insurance companies, and reduce an impediment to planting perennial grasses. The conclusions are based on a utility-maximizing stochastic budgeting model with actual grain yields and FAPRI baseline prices for a representative farm in northeastern Missouri.

Keywords: Agricultural and Food Policy; Crop Production/Industries; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 28
Date: 2013-09
New Economics Papers: this item is included in nep-agr and nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaeaci:156945

DOI: 10.22004/ag.econ.156945

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