Yield aggregation impacts on area-based insurance and commodity program

Abstract

This study utilizes farm yield data to generate the relationship between farm and county yields, and farm and crop reporting district (CRD) yields by using seemingly unrelated regression (SUR). The relationships are used to examine whether CRD level insurance is a viable alternative for county level Group Risk Plan (GRP) or Group Risk Insurance Protection (GRIP) by generating the certainty equivalent for each producer under different insurance scenarios, which includes no insurance, county level insurance and CRD level insurance under different scales and risk aversion coefficient levels. The analysis is conducted for Iowa CRD 10, Ohio CRD 10, Georgia CRD 70, Mississippi CRD 40, and Kansas CRD 30.

This study also analyzes how well deep loss and shallow loss programs perform in different production regions by looking at the marginal certainty equivalent effects.