Estimating prevented planting coverage factor variation

Abstract

Abstract Prevented planting payments reimburse crop producers for losses from not being able to plant. These payments provide critical protection to producers; however, these payments, which are determined using a nationwide, crop-specific coverage factor, have been questioned to induce moral hazard. Depending on the region and crop insurance coverage, payments from this provision exceed producers’ losses. This paper estimates the prevented planting coverage factor by coverage level and region that would equitably reimburse corn and soybean producers for their losses. We find the prevented planting coverage factor has significant variation across coverage levels and location within our study region. The prevented planting coverage factor was found to decline as the policy coverage level increases. The further north in the study region the higher the coverage factor, likely due to increased land rent expenses. The results provide a unique perspective of how these coverage factors would vary to equitably compensate producers for losses, which addresses the moral hazard concerns with prevented planting.