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Risks and Risk Management Strategies
Government Policy and Risk
Management
Federal Crop Insurance
Farm Commodity Programs and Risk Management
Risks and Risk Management Strategies
Managing Risk in Farming:
Concepts, Research, and Analysis (March 1999). Comprehensive assessment
of risk in agriculture, risk management strategies available
to farmers, and the effectiveness of various risk management
strategies.
Managing
Farm Risk: Issues and Strategies (February 2000).
A compilation of articles from Agricultural Outlook magazine covers topics such as farmers' views of risk,
the effectiveness of various risk management strategies,
commodity price variability, and tax-deferred savings
accounts for farmers.
Agricultural
Contracting: Trading Autonomy for Risk Reduction (February
2006).
The share of production under contract grew from 11 percent
in 1969 to 39 percent in 2003. For farm operators, contracts
provide benefits from reduced risks, but also result in
loss of managerial control and reduced autonomy. For the full report, see Agricultural
Contracting Update: Contracts in 2003 (January 2006).
Agricultural Contracting Update, 2005 (April 2008). A growing share of U.S. farm production is produced and sold under agricultural contracts. Contracts are far more likely to be used on large farms than on small ones. Marketing and production contracts covered 41 percent of the value of U.S. agricultural production in 2005, up from 39 percent in 2003 and 36 percent in 2001.
Agricultural
Boom and Bust: Will History Repeat in the 1990s? (April 1999).
Farm incomes, prices, exports, land values, and interest
rates show both similarities and differences from earlier
periods of downturn in the farm economy.
Risk
Management Tools in Europe: Agricultural Insurance, Futures,
and Options (February
2004).
A variety of agricultural insurance products with different
levels of government support are available to farmers
in Europe, reflecting the variety of crops grown and growing
conditions in various countries. Changes in economic and
agricultural policies in Europe over the past 10 to 15
years appear to have created conditions conductive to
the development of futures and options markets.
Determinants of Endogenous Price Risk in Corn and
Wheat Futures Markets (August 2000). Stocks-to-use ratios, futures
market activity, and other factors affect price variability
for corn and wheat futures contracts.
Forward
Contracting of Inputs: A Farm-Level Analysis (November
1999). Use
of output marketing and production contracts, managerial
ability, regional location, farm size, and specialization
in cash grain production are all correlated with greater
forward contracting of inputs among farmers.
Characteristics and Risk
Management Needs of Limited-Resource and Socially Disadvantaged
Farmers (April 1997). This group of farmers tends to specialize
more in livestock production, which is not covered by
federally subsidized insurance and is eligible for few
other government supports.
Government Policy and Programs
for Risk Management
"Distributional and Risk Reduction Effects of Commodity Revenue Program Design," Review of Agricultural Economics, Vol. 30, No. 3, Fall 2008, pp. 543-53.
Whole-Farm Approaches
to a Safety Net (June 2006). "Whole-farm revenue"
programs have been proposed as a new form of income
stabilization that would be available to all U.S.
farms. This report looks at the risk management potential
for such programs, which are not linked to production
of particular commodities, and the obstacles to implementing
such an approach.
Why
Hasn't Crop Insurance Eliminated Disaster Assistance? (June 2005). Since the early 1980s, the U.S. Government has promoted
crop insurance as a replacement for disaster payments
as the primary form of risk management aid for farmers.
Despite increased participation in crop insurance, ad
hoc disaster assistance packages have continued to be
enacted. This article discusses the government costs of
crop insurance and how participation varies by type of
farm and region.
A Safety Net for Farm
Households (October 2000). This report, comparing the benefits of
four different farm assistance programs, finds that distribution
of benefits varies widely across programs.
The
Agricultural Risk Protection Act of 2000 (May 2000). Text of
the legislation.
Risk, Government Programs,
and the Environment (March 2004). Private and public tools used
to manage financial risk in agriculture may influence
farmers' production decisions. These decisions, in turn,
can influence environmental quality. This technical bulletin
summarizes research and provides some perspective on private
and public attempts to cope with financial risks and their
environmental consequences.
The Value of Plant Disease
Early Warning Systems: A Case Study of USDA's Soybean
Rust Coordinated Framework (April 2006). This report examines USDA's
system to provide real-time, county-level forecasts of
soybean rust in the United States. The information provided
by Federal, State, industry, and academic partners is
estimated to have increased U.S. soybean producers' profits
by between $11 million and $299 million in 2005, or between
16 cents and $4.12 per acre depending on assumptions,
especially those concerning the accuracy of rust infection
forecasts.
Federal Crop Insurance
Managing
Risk With Revenue Insurance (May 2007). Crop revenue insurance
offers farmers a way to manage revenue variability that
results from yield and price risks. Commodity-level revenue
insurance, particularly for corn, soybeans, and wheat,
has become a major part of the subsidized Federal crop
insurance program. Whole-farm revenue insurance, based
on combined revenue from all commodities produced on a
farm, is a more broad-based approach, but is difficult
to administer.
Production
and Price Impacts of U.S. Crop Insurance Programs (December 2001).
Subsidized crop insurance results in relatively small
increases in crop plantings, with the increase concentrated
in the Plains states. Although planted acreage rises for
all insured crops, wheat and upland cotton account for
three-fourths of the expansion.
An Empirical Analysis of Acreage Effects of Participation in the Federal Crop Insurance Program (November 2004). This analysis focuses on corn and soybean production in the Corn Belt and wheat and barley production in the Upper Great Plains. The results confirm that increased participation in insurance programs provokes statistically significant acreage responses in some cases, though the response is very modest in every case.
Asymmetric Information
in the Market for Yield and Revenue Insurance (April 2001). Differences
in yield and revenue risk help explain farmers' choice
of insurance product or coverage level.
U.S.
Crop Insurance: Premiums, Subsidies and Participation (December 2001).
How have producers responded to increased premium subsidies,
a prominent feature of the U.S. crop insurance program
since the early 1980s, and expansion of insurance coverage
choices? Premium discounts were added to existing premium
subsidies in 1999 and again in 2000, and the Agricultural
Risk Protection Act of 2000 revised subsidy rates and
increased government funding of premium subsidies for
2001-05.
Economic Analysis of the Standard Reinsurance Agreement (Fall 2004). The paper outlines provisions of the SRA and analyzes how the SRA affects returns from underwriting crop insurance.
Private Crop Insurers and the Reinsurance Fund Allocation Decision (August 2007). This research investigates the strategic behavior of private crop insurance firms reinsured by USDA through the Standard Reinsurance Agreement (SRA). A simulation model of the SRA is used to compare the post-SRA returns of actual firm allocations to two alternative allocation strategies based on a aggregate models and a policy-level econometric forecasting model.
Farm Commodity Programs and Risk Management
New Market Realities Affect Crop Program Choices (November 2008). Higher crop prices mean increased amounts of insurance under the Federal crop insurance program but reduced likelihood of commodity program payments based on fixed target prices. The new Average Crop Revenue Election (ACRE) program offers revenue protection based on recent market prices, but participating farmers must forgo some benefits of traditional commodity programs.
Supply Response under Risk: Implications for Counter-Cyclical Payments' Production Impact (Spring 2007). This study investigates the role of risk in farmers' acreage decisions for major field crops in the North Central region by revisiting an earlier study by Chavas and Holt.
Forecasting
the Counter-Cyclical Payment Rate for U.S. Corn: An Application
of the Futures Price Forecasting Model (January 2005). This report
provides background information on the model for corn,
its data requirements, the forecast procedure, and forecast
results for crop years 2003/04 and 2004/05.
The Excel spreadsheet models for corn, soybeans, and wheat
are available at Season-Average
Price Forecasts.
Valuing Counter-Cyclical
Payments: Implications for Producer Risk Management and
Program Administration (February 2007). This study illustrates an
improved method for estimating counter-cyclical payment
rates by accounting for the variability in market price
forecast errors. Forecasters and producers can use the
model to calculate the probability of having to repay
advanced counter-cyclical payments.
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