PRODUCTION RISK AND CROP INSURANCE IN MALTING BARLEY: A STOCHASTIC DOMINANCE ANALYSIS

William Wilson, Cole Gustafson and Bruce L. Dahl

No 23561, Agribusiness & Applied Economics Report from North Dakota State University, Department of Agribusiness and Applied Economics

Abstract: Malt barley is an important specialty crop in the Northern Plains and growers mitigate risk with federally subsidized crop insurance and production contracts. However, growers face considerable risk due to "coverage gaps" in crop insurance that result in uncertain indemnity payments due to uncertainty of their crop meeting contract specifications. A stochastic dominance model is developed to evaluate alternative risk efficient strategies for growers with differing risk attitudes and production practices (irrigation vs. dryland). Results show that efficient choices are highly dependent on risk attitudes for dryland growers, but not irrigated growers. Sensitivities with respect to acceptance risk and level of crop insurance subsidization are presented. Increased specialization of agricultural crops with greater emphasis on quality characteristics will limit dryland producer interest in federal crop insurance.

Keywords: Crop Production/Industries; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 24
Date: 2006
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Citations: View citations in EconPapers (1)

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Working Paper: PRODUCTION RISK AND CROP INSURANCE IN MALTING BARLEY: A STOCHASTIC DOMINANCE ANALYSIS (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nddaae:23561

DOI: 10.22004/ag.econ.23561

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