Reducation of volatility yield and prices in corn production using revenue insurance

Abstract

Revenue insurance represents a new risk management tool in agriculture, based on the difference between the guaranteed and actual revenue of the entire farm or some production. Most commonly, crops that have a significant share in the structure of planting or significant yield are insured with the application of this tool. Mercantile corn is the most important field crop in Serbia, and climatic conditions and price changes have a huge impact on its production. As one of the aspects of struggle with volatility of revenues there is a possibility to insure the corn revenue, by concluding the insurance agreement. However, the revenue insurance is very slightly applied in the world, while in our country in recent years is in its infancy. This paper analyzes the economic and legal aspects of the insurance model in order to determine the basic mechanisms of its functioning, as well as the conditions that must be fulfilled so that conclusion of the agreement would have an economic justification for both parties (farmers and financial institutions). It also examines the normative framework for the conclusion of this agreement and stresses the differences relative to the classic insurance contract.