Content area
Full text
Introduction
To be successful, farmers must manage several types of risk, including those inherent to production, marketing, financing, and human resources. A variety of risk management tools and practices have been developed to help farmers mitigate the wide range of risks they face. One specific tool, crop insurance, provides an effective means for managing production risk.
Since its inception, crop insurance has gained acceptance among farmers. While participation in the program is not 100 percent, crop insurance is a commonly used risk management tool. Since the 1994 Act, participation in the crop insurance program has increased steadily. For example, net acres insured totaled 99.640 million in 1994 as compared to 217.662 million in 2005. Total crop insurance premium has increased from $949.395 million in 1994 to $3.712 billion in 2005. Meanwhile, crop insurance contracts represented approximately $13.068 billion of liability in 1993 versus $37.188 billion in 2005 (National Summary of Business Report, 2009). The Risk Management Agency (RMA) of the United States Department of Agriculture (USDA) reported that, in Illinois, 72 percent of soybean acres and 71 percent of corn acres were insured during the 2005 growing season (2005 Illinois Crop Insurance Profile).
When selecting crop insurance coverage, farmers must consider several factors. The importance associated with relevant factors considered when making crop insurance decisions varies among individual farmers. When considering crop insurance coverage, farmers have a variety of alternatives, ranging from catastrophic (CAT) coverage on a county-by-county basis to revenue or yield protection on individual farm units. Additionally, multiple coverage levels exist within a majority of existing crop insurance plans. As available crop insurance options have increased, selecting the appropriate coverage has become a more complicated process. The prevalence of crop insurance participation and the existence of multiple selection criteria also make understanding participant decisions more difficult.
To date, much of the research conducted on the Federal Crop Insurance Program has examined participation rates and the factors responsible for changes in the level of participation ([14] Knight and Coble, 1997; [9] Gardner and Kramer, 1986; [4] Calvin, 1992; [8] Coble et al. , 1997; [11] Goodwin and Kastens, 1993; [13] Just and Calvin, 1993). More recent studies have begun to analyze the choices made among crop insurance products and coverage levels ([16] Makki...