Use Of Crop Insurance Research Articles

Does risk assessment and specific knowledge impact crop insurance underwriting? Evidence from Romanian farmers

Romania is one of the European countries in transition which has undertaken changes to align with the common agricultural policy after the EU adhesion. Our study examines the factors influencing the use of crop insurance as a strategy to mitigate risks by Romanian farmers. Using a sample of 721 farmers and a multinomial logit model we evaluate the impact of risk perception, risk taking, and specific knowledge, along with the farm’s characteristics and insurance perception variables, on the decision to buy crop insurance. We introduce among the classical influence factors, a novel determinant of crop insurance demand—the specific knowledge. Our empirical findings reveal that crop insurance knowledge and the assessment of risks are key factors for crop insurance buying, while the cultivated area, the trust in the insurer, and the type of culture are also significantly influencing this decision to buy crop insurance. Moreover, the chosen coverage is negatively influenced by the insurance premium adequacy and positively influenced by the farm’s revenue from crops. These findings are expected to help governments, policymakers, and insurers from transitional countries to better implement crop insurance as a risk management tool, by subsidizing the policies and raising the awareness of farmers regarding the risk exposure.

Pest prevention, risk, and risk management: The case of Drosophila suzukii

AbstractPest prevention can play an important role in reducing pest pressure and pesticide use. Yet its adoption remains suboptimal. We develop a theoretical model to analyze the circumstances that favor or hinder the uptake of preventive measures against pests, and test the derived hypotheses using an empirical application of Swiss grapevine producers' decisions on preventive measures against Drosophila suzukii. We show that higher risk aversion hinders farmers' prevention efforts. Furthermore, lower general background risk, characterized by the use of crop insurance, decreases pest prevention. We discuss the implications for supporting policy goals of managing pest pressure and reducing pesticide use.

Insured Corn Losses in the United States from Weather and Climate Perils

Abstract This study used corn insurance data as a proxy for agricultural loss to better inform producers and decision-makers about resilience and mitigation. Building on previous research examining crop losses based on weather and climate perils, updates to the peril climatology, identification of peril hotspots, and the quantification of annual trends using inflation-adjusted indemnities for corn were performed over the period 1989–2020. Normalization techniques in loss cost and acreage loss at county-level spatial resolution were also calculated. Indemnity data showed drought and excess moisture as the two costliest and most frequent perils for corn in the United States, although changes in the socioeconomic landscape and frequency of extreme weather events in the recent decade have led to significant increases in corn indemnities for drought, heat, excess moisture, flood, hail, excess wind, and cold wet weather. Normalized losses also displayed significant trends but were dependent on the cause of loss and amount of spatial aggregation. Perhaps most notable were the documented robust increases in corn losses associated with excess moisture, especially considering future projections for increased mid and end-of-century extreme precipitation. Subtle decreasing trends in drought, hail, freeze/frost, and flood loss cost over the study period indicates hedging taking place to protect against these perils, especially in corn acreage outside the Corn Belt in high-risk production zones. The use of crop insurance as a proxy for agricultural loss highlights the importance for quantifying spatiotemporal trends by informing targeted adaption to certain hazards and operational management decisions. Significance Statement This study quantified the climatology and trends of weather and climate perils affecting corn in the United States. Robust increases in losses were noted with perils causing excess moisture, which is cause for further concern given projected increases in extreme rainfall under a warming climate.

Shifting cultivation geographies in the Central and Eastern US

Climate change is projected to transform agricultural systems around the globe. Though climate strongly influences where and how farmers cultivate, millennia of agricultural innovation have expanded cultivation geographies far beyond what sun, soil, and water alone can support. Evaluating how climate interacts with human activity to shape cultivation possibilities for farmers is vital to understanding the impacts of climate change on agriculture. I assess how climate interacts with agricultural activity to shape the cultivation geographies of six major crops: corn, soy, wheat, cotton, hay and alfalfa. For each crop, I model biophysical suitability, or the probability of a crop’s occurrence given only biophysical conditions, and agricultural suitability, or the probability of a crops occurrence given biophysical conditions as well as agricultural inputs, farm resources, and farm(er) characteristics. Though biophysical conditions strongly shape cultivation geographies, agricultural activity—particularly the use of crop insurance and agricultural inputs—amplifies and expands the cultivation geographies of these major crops, often into regions biophysically unsuited to their cultivation. I project biophysically driven shifts in cultivation geographies to 2100 under low, moderate, and high emissions scenarios and find that these geographies will shift strongly north, with the Corn Belt becoming unsuitable to the cultivation of corn by 2100. These results indicate that significant agricultural adaptation will be necessary and inevitable in the Central and Eastern U.S.

Who buys crop insurance? Predictors of the participation gap between organic and conventional farms

AbstractThis study examines the participation gap in crop insurance between organic and conventional producers. To solicit input from producers of organic and diversified crop production systems, we developed a national survey through the Organic Agriculture Research and Education Initiative (OREI) that resulted in over 1,000 valid responses, as well as data from the Agricultural Resource Management Survey (ARMS). Results suggest a high degree of correlation between crop insurance participation with respect to the degree of commercialization of a farm. Additionally, small and diversified operations report that the complexity and record keeping associated with crop insurance is often not worthwhile. This paper concludes with a discussion regarding future risk management education programs and how they can be better targeted by combining the use of crop insurance in conjunction with improved record keeping and a better understanding of loan requirements and documentation.

Revisiting the diversification and insurance relationship: Differences between on– and off-farm strategies

Crop insurance is an important instrument for farmers to cope with climate risks. Yet, also, diversification plays a crucial role. The use of crop insurance and diversification is interrelated. For example, an increasing support and uptake of insurance solutions may discourage farmers to take diversification measures on the farm, given that they now have an insurance dealing with risks. This may have unintended consequences, such as biodiversity decline.We examine the relationships between seven different kinds of income diversification and the uptake of crop insurance. Theoretically, both substitutive and complementary relationships are possible. The reason is that, depending on their preferences and constraints, farmers choose income bundles that optimally balance profits and risks. Here we provide the first systematic empirical examination of this issue. Our analysis is based on our own survey data from 1176 Swiss fruit growers. We consider on– and off-farm diversification strategies, namely inter-varietal diversity, agro-tourism, processing and direct marketing of products, creation of financial reserves for bad times, forestry work, off-farm investment, off-farm income and their association with insurance uptake. In line with our theoretical reasoning, we do indeed find both substitutive and complementary relationships. In general, on-farm diversification is associated with positive insurance demand, whereas off-farm diversification has a negative association.

The roles of risk aversion and climate-smart agriculture in climate risk management: Evidence from rice production in the Jianghan Plain, China

Under pressure to ensure national food security, China’s rice sector needs to adapt to changing climatic conditions. By investigating the effect of farmer’s risk preferences, adoption of climate-smart agricultural practices and use of crop insurance on technical efficiency of rice production, this paper explores climate-smart agriculture as a strategy to cope with climate risk challenges. The empirical investigation adopts a stochastic frontier analysis approach which allows simultaneous estimation of a production function and identification of factors associated with technical efficiency. Data for rice plots of 873 farmers in the Jianghan Plain of China are used to fit the model. Farmers’ risk preferences are measured using a standard experiment approach. Most respondents are found to be risk averse, and greater risk aversion is found to significantly decrease technical efficiency. Using climate-smart practices – crop rotations and conservation tillage – have the extra benefit of improving technical efficiency; crop insurance has no significant effect on technical efficiency. Overall, the results shed new light on the negative role of risk aversion on China’s agriculture, and the multiple benefits of climate-smart practices in creating a stronger agricultural production system that is resilient to climate risks.

Demand for Farm Insurance Under Financial Constraints

This article investigates the effect of the use of crop insurance on farms’ economic performance. The authors hypothesize the existence of reciprocal causation between crop insurance use and the economic performance of farms in an environment characterized by imperfect financial markets and farm budget constraints. The results confirm the reciprocal causation hypothesis. Economic performance is found to positively influence farms’ demand for insurance, confirming the significance of budget constraints. Moreover, insurance is found to have a negative effect on Hungarian farms’ economic performance, implying that the crop insurance system is inefficient.

Rainfall Induced Production Risk in Coffee Crop and Mitigation Strategies Adopted by Farmers: An Economic Analysis

The study analyses the rainfall induced risks in coffee production and mitigating strategies adopted by the coffee growers in Chickmagalore district, Karnataka. Results show a high variability in production of Robusta variety than of Arabica variety. The major mitigating strategy adopted against production risks by coffee farmers include sprinkler irrigation, and more use of nitrogenous fertilizers. Use of crop insurance as the risk mitigating strategy is limited to a small proportion of farmers. Yet, the reward for risk taking by coffee growers is higher than the cost of mitigation.

Polish Farmers' Perception of Spring Frost and the Use of Crop Insurance Against this Phenomenon in Poland

Polish Farmers' Perception of Spring Frost and the Use of Crop Insurance Against this Phenomenon in Poland

Agricultural policy and its impact on fuel usage: Empirical evidence from farm household analysis

Off-farm work is a growing reality in the US agricultural sector as a whole. Another staple program in the US agriculture is the use of crop insurance. This paper assesses hitherto unaddressed issues of fuel consumption and hence pollution generated by farm households associated with off-farm work and crop insurance. We applied a quantile regression method on a unique national farm-level survey data to address the fuel consumption issues. Results indicate that off-farm work by operators tends to decrease fuel expenses. In contrast, households with crop insurance had higher fuel consumption thereby increasing fuel usage. Finally, our study shows that the net effect of these two activities resulted in an increase in the pollution level.

The Effect of Personal and Farm Characteristics upon Grain Marketing Practices

AbstractA survey of Kansas, Texas, and Iowa agricultural producers was taken to examine the factors affecting their grain marketing practices. Sales indices models and models of qualitative choice are used to determine whether marketers' choices of cash market, forward contract, or futures and options oriented marketing practices are significantly affected by their personal and farm business characteristics. Results indicate that geographic location, farm size, grain enterprise specialization, farming experience, use of grain storage, and use of crop insurance have significant effects upon the respondents' choice of grain marketing practices.

A Stochastic Dominance Analysis of Tillage and Crop Insurance Practices in a Semiarid Region

AbstractStochastic dominance analysis for tillage systems in the semiarid conditions of the central Great Plains indicates that risk‐averse managers would prefer conservation tillage systems for wheat and grain sorghum with and without the use of crop insurance instead of the traditional conventional dryland wheat‐fallow cropping system. Higher yields in conjunction with reduced fuel, labor, and repair costs more than offset increased chemical costs of the conservation systems. Increased yields generally are attributed to the soil moisture conservation characteristic of the conservation tillage systems.

Implications of Crop Insurance for Farmers and Lenders

AbstractThe effect of the farmer's choice of crop insurance was evaluated on both the farmer's and lender's performance. This was done using whole-farm, Monte Carlo simulation for Texas wheat/sorghum operations. Results indicate crop insurance would be preferred by moderately risk-averse farmers when farm firm failure became an issue or the insurance loss ratio approached one. A lender always preferred the use of crop insurance, especially when the probability of firm bankruptcy was an issue.

Compulsory Insurance and Allocative Efficiency in Agriculture

This note addresses the question of how the compulsory use of crop insurance by farmers who participate in agricultural credit programs will affect allocative behavior. We will restrict our analysis to the case where insurance is provided without administrative or safety loadings, i.e. where the insurance is actuarially fair. Some economists, particularly Roumasset ( 1978), have concluded that compulsory crop insurance will result in misallocation of resources. Specifically, it is hypothesized that resources will be misallocated because . . . a risk-neutral individual who is forced to buy insurance will subsequently make decisions as if he is risk preferring. (Roumasset 1978) While there may be some validity to that position in the case of risk seeking individuals with some crop insurance programs, it is not generalizable to all situations. In particular, it is our position that the hypothesis is not valid for crop credit insurance where credit is granted by a publicly-owned insurance program. We will show here that properly designed public programs of crop credit insurance do not lead to a misallocation of resources. We do not deny that the effective design of public insurance credit programs may present difficulties, but rather that the criticism of allocative inefficiency is unfounded in the case of crop credit insurance.