Hostname: page-component-586b7cd67f-t8hqh Total loading time: 0 Render date: 2024-11-22T23:51:47.208Z Has data issue: false hasContentIssue false
  • English
  • Français

A Risk Analysis of Adjusted Gross Revenue-Lite on Beef Farms

Published online by Cambridge University Press:  26 January 2015

Jeffery R. Williams ,
Andrew T. Saffert ,
G. Art Barnaby ,
Richard V. Llewelyn  and
Michael R. Langemeier
Jeffery R. Williams
Affiliation:
Department of Agricultural Economics, Kansas State University, Manhattan, Kansas
Andrew T. Saffert
Affiliation:
Department of Agricultural Economics, Kansas State University, Manhattan, Kansas
G. Art Barnaby
Affiliation:
Department of Agricultural Economics, Kansas State University, Manhattan, Kansas
Richard V. Llewelyn
Affiliation:
Department of Agricultural Economics, Kansas State University, Manhattan, Kansas
Michael R. Langemeier
Affiliation:
Department of Agricultural Economics, Purdue University, West Lafayette, Indiana
Get access Rights & Permissions [Opens in a new window]

Abstract

This study evaluates the Adjusted Gross Revenue-Lite (AGR-Lite) whole-farm adjusted gross revenue insurance program on net farm income risk using panel data from 49 southeast Kansas beef farms. On average for the group, but not each individual farm, AGR-Lite reduces the mean and standard deviation of net farm income, raises the average minimum, and lowers the average maximum observations of the net income distribution. Thirty-four farms (69%) received at least one indemnity payment. Stochastic efficiency with respect to a function reveals that AGR-Lite is preferred by 18 of the farm managers (37%) when an upper bound on the risk-aversion coefficient is used.

Keywords

AGR-Litebeef farmsrisk analysiswhole-farm revenue insuranceQ12Q18
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 46 , Issue 2 , May 2014 , pp. 227 - 244
Copyright
Copyright © Southern Agricultural Economics Association 2014

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abdulkadri, A.O. and Langemeier, M.R.. “Using Farm Consumption Data to Estimate the Intertemporal Elasticity of Substitution and Relative Risk Aversion Coefficients”. Agricultural Finance Review 60(2000):61–70.CrossRefGoogle Scholar
Anderson, J.R. and Dillon, J.L.. Risk Analysis in Dryland Farming Systems. Rome, Italy: FAO, 1992.Google Scholar
Atwood, A.J.Watts, M.J., and Baquet, A.E.. “An Examination of the Effects of Price Supports and Federal Crop Insurance upon the Economic Growth, Capital Structure, and Financial Survival of Wheat Growers in the Northern High Plains”. American Journal of Agricultural Economics 78,1(1996):212–224.CrossRefGoogle Scholar
Babcock, B.A.Choi, E.K., and Feinerman, E.. “Risk and Probability Premiums for CARA Utility Functions”. Journal of Agricultural and Resource Economics 18,1(1993):17–24.Google Scholar
Barham, E.H.B.Robinson, J.R.C., Richardson, J.W., and Rister, M.E.. “Mitigating Cotton Revenue Risk through Irrigation, Insurance, and Hedging”. Journal of Agricultural and Applied Economics 43,4(2011):529–540.CrossRefGoogle Scholar
Carriker, J.G.Williams, J.R., Barnaby, G.A., and Black, J.R.. “Yield and Income Risk Reduction under Alternative Crop Insurance and Disaster Assistance Designs”. Journal of Agricultural and Resource Economics 16,2(1991):238–250.Google Scholar
Dismukes, R. and Coble, K.. “Managing Risk with Revenue Insurance. Washington, DC: U.S.Department of Agriculture Economic Research Service”. Amber Waves 4,6(2006):22–27.Google Scholar
Dismukes, R. and Durst, R.. Whole-farm Approaches to a Safety Net. Washington, DC: U.S. Department of Agriculture Economic Research Service Economic Information Bulletin EIB-15, 2006.CrossRefGoogle Scholar
Feuz, D.M. “A Comparison of the Effectiveness of Using Futures, Options, LRP Insurance, or AGR-Lite Insurance to Manage Risk for Cow/Calf Producers.” NCCC-134 Conference Proceedings, 2009. Internet site: http://www.farmdoc.uiuc.edu/ncccl34 (Accessed March 6, 2012).Google Scholar
Fields, D. and Gillespie, J.. “Beef Producer Preferences and Purchase Decisions for Livestock Price Insurance”. Journal of Agricultural and Applied Economics 40,3(2008):789–803.CrossRefGoogle Scholar
Hardaker, J.B.Richardson, J.W., Lien, G., and Schumann, K.D.. “Stochastic Efficiency Analysis with Risk Aversion Bounds: A Simplified Approach”. The Australian Journal of Agricultural and Resource Economics 48(2004):253–270.CrossRefGoogle Scholar
Langemeier, R.M. Kansas Farm Management SAS Data Bank Documentation. Kansas State University, Agricultural Exp. Sta., Agri. Economics Staff Paper No. 11-01. August 2010.Google Scholar
Llewelyn, V.R.Williams, J.R., Schurle, B.W., and Langemeier, M.R.. “Analysis of FARRM and Counter-cyclical Savings Accounts in Kansas”. Kansas State University, Agri. Exp. Sta. Rep. No. 03-408-A, 2003.Google Scholar
Miller, C, Coble, K.H., and Barnett, B.J.. “Investigating the Implications of Multi-crop Revenue Insurance for Producer Risk Management”. Paper presented at the Southern Agricultural Economics Association Meeting, Lexington, KY, January 29-February 2, 2000. Internet site: http://ageconsearch.umn.edu/bitstream/15802/1/pp00-002.pdf (Accessed February 16, 2012).Google Scholar
Miranda, J.M. “Area-Yield Crop Insurance Reconsidered”. American Journal of Agricultural Economics 73,2(1991):233–242.CrossRefGoogle Scholar
Mishra, A.K. and Goodwin, B.K.. “Revenue Insurance Purchase Decisions of Farmers”. Applied Economics 38(2006): 149–159.CrossRefGoogle Scholar
Patrick, G.F. and Rao, A.S.. “Crop Insurance's Role in Risk Management on Hog-Crop Farms”. North Central Journal of Agricultural Economics 11,1(1989): 1–10.CrossRefGoogle Scholar
Pratt, J.W. “Risk Aversion in the Small and in the Large”. Econometrica 32, 1-2(1964): 122–136.CrossRefGoogle Scholar
Richardson, J.W.Schumann, K.D., and Feldman, P.A.. “SIMETAR®. Simulation for Excel to Analyze Risk”. Agricultural and Food Policy Center, Dept. of Agric. Econ., Texas A&M University, 2008.Google Scholar
Richardson, J.W.Smith, E.G., and Knutson, R.D.. “An Analysis of Whole-farm Revenue Safety Net Options in Agriculture”. Working Paper, Agri. and Food Policy Center, Texas A&M University, 2001. Internet site: http://ageconsearch.umn.edu/bitstream/42728/2/wp01-9.pdf (Accessed February 16, 2012).Google Scholar
Schnitkey, G.D.Sherrick, B.J., and Irwin, S.H.. “Evaluation of Risk Reductions Associated with Multi-Peril Crop Insurance Products”. Agricultural Finance Review 63(2003): 1–21.CrossRefGoogle Scholar
Schumann, K.D.Feldman, P.A., Richardson, J.W., and Smith, E.G.. “Comparisons of Alternative Safety Net Programs for the 2000 Farm Bill”. Working Paper, Agri. and Food Policy Center, Dept. of Agri. Econ., Texas A&M University, 2001. Internet site: http://www.afpc.tamu.edu/pubs/0/232/wp01-3.pdf (Accessed February 16, 2012).Google Scholar
Schumann, K.D.Richardson, J.W., Lien, G., and Hardaker, J.B.. “Stochastic Efficiency Analysis Using Multiple Utility Functions”. Paper presented at the American Agricultural Economics Association Meeting, Denver, CO, August 1-4, 2004.Google Scholar
Stokes, J.R.Nayda, W.I., and English, B.C.. “The Pricing of Revenue Assurance”. American Journal of Agricultural Economics 79,2(1997): 439–451.CrossRefGoogle Scholar
Turvey, C.G. “Whole-farm Income Insurance in a Canadian Context”. Paper presented at the 2010 AAEA, CAES, and WAE A Joint Meeting, Denver, CO, July 25-27, 2010.CrossRefGoogle Scholar
U.S.Department of Agriculture. Adjusted Gross Revenue Standards Handbook: 2007 and Succeeding Insurance Years. Washington, DC: Federal Crop Insurance Corporation: Product Administration and Standards Division FCIC-18050-1, January 2007. Internet site: http://www.rma.usda.gov/handbooks/18000/2007/07_18050.pdf (Accessed July 19, 2011).Google Scholar
U.S.Department of Agriculture. Adjusted Gross Revenue-lite Standards Handbook: 2009 and Succeeding Insurance Years. Washington, DC: Federal Crop Insurance Corporation: Product Development Division, FCIC 18050-1, July 2008. Internet site: http://www.rma.usda.gov/handbooks/20000/2009/ 20030.pdf.Google Scholar
U.S.Department of Agriculture. 2007 Census of Agriculture—Kansas State and County Data. 2009. Internet site: http://www.agcensus.usda.gov/Publications/2007/ FulLReport/.Google Scholar
U.S.Department of Agriculture. Adjusted Gross Revenue-Lite. Washington, DC: Risk Management Agency Program Aid 1907, 2010. Internet site: http://www.rma.usda.gov/pubs/rme/agr-lite.pdf.Google Scholar
U.S.Department of Agriculture. Summary of Business Application. Washington, DC: Risk Management Agency, 2012a. Internet site: http://www3.rma.usda.gov/apps/sob/.Google Scholar
U.S.Department of Agriculture. Summary of Business. Washington, DC: Risk Management Agency, 2012b. Internet site: http://www3.rma.usda.gov/apps/sob/insurancePlan.cfm (Accessed September 16, 2013).Google Scholar
Wang, H.H.Hanson, S.D., Meyers, R.J., and Black, J.R.. “The Effects of Crop Yield Insurance Designs on Farmer Participation and Welfare”. American Journal of Agricultural Economics 80,4(1998): 806–820.Google Scholar
Williams, J.R.Carriker, G.L., Barnaby, G.A., and Harper, J.K.. “Crop Insurance and Disaster Assistance Designs for Wheat and Grain Sorghum”. American Journal of Agricultural Economics 75,2(1993):435–447.CrossRefGoogle Scholar
Williams, J.R.Saffert, A.T., Art Barnaby, G., Llewelyn, R.V., and Langemeier, M.R.. “Adjusted Gross Revenue-lite or Beef Farms Model Documentation.” December 2013. Internet site: http://www.agmanager.info/crops/insurance/workshops/filespdf/Appendix_JAAE.pdf (Accessed December 5, 2013).Google Scholar