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Abstract

Concerns about the drought of 1988 continuing on into 1989 have lead to increased interest in the use of crop insurance to mitigate the effects of low yields on farm income. This paper analyzes the selection of crop insurance yield guarantee levels and indemnity prices based on risk preferences for corn/soybean farmers in northeastern Kansas. Using stochastic dominance with respect to a function analysis, it was determined that for other than the most risk-preferring producers, some level of crop insurance is contained in the preferred set of strategies. For the most risk-averse producers, the highest yield guarantee level and indemnity price election are preferred.

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