EVALUATION OF HEDGING IN THE PRESENCE OF CROP INSURANCE AND GOVERNMENT LOAN PROGRAMS

This research evaluates the interaction of new alternative insurance designs, forward pricing tools and the government revenue protection program while assuming a government loan program is in place. A numerical analysis is conducted using a revenue simulation model that incorporates futures prices, basis, and yield variability. Three crop insurance designs at 75 percent of yield guarantee are evaluated. Optimal futures and at-the-money put option hedge ratios are derived for expected utility maximizing of soybean producers. Sensitivity to loan rate levels are examined. Our results suggest that loan programs profoundly alter the optimal producer strategy.


Issue Date:
2001
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/18965
Total Pages:
19
Series Statement:
2001 Conference, St. Louis, MO, April 23-24, 2001




 Record created 2017-04-01, last modified 2017-08-24

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