Evaluation of Crop Insurance Choices for Cotton Producers under the 2014 Farm Bill

Kishor Luitel, Thomas Knight and Darren Hudson

No 196882, 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia from Southern Agricultural Economics Association

Abstract: New crop insurance coverage offered by the 2014 Farm Bill will be available to cotton farmers beginning in 2015. Stacked Income Protection Plan (STAX) and Supplemental Coverage Option (SCO) are new crop insurance options, which are designed to protect farmers from shallow losses. STAX is only available for upland cotton producers, while SCO is available for all major farm program crops. The objective of this project is to assess the benefits of the new crop insurance offerings for cotton producers in the Texas High Plains. Representative dry land and mixed, irrigated and dry land farms were developed using consensus evaluations of panels of producers in two distinct areas of the High Plains. Our simulation analysis examined producer welfare benefits of alternative combinations of underlying yield or revenue insurance coverage and STAX or SCO. The results suggest that Revenue Protection combined with STAX is the optimal insurance selection for both risk neutral and risk averse producers.

Keywords: Agricultural and Food Policy; Production Economics; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 20
Date: 2015-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:saea15:196882

DOI: 10.22004/ag.econ.196882

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