AgriStability with Catastrophic Price Risk for Cow-Calf Producers
"AgriStability is the primary Canadian agricultural risk management program. Recent experience with bovine spongiform encephalopathy (BSE) in the cattle sector demonstrated that output prices are susceptible to both "normal" risk and sudden, "catastrophic" declines. This paper evaluates the AgriStability program for cow-calf producers when there is potential for catastrophic price risk. A simulation model is developed. Under a base case scenario, when there is no catastrophic price risk, AgriStability behaves more like an income support program than a risk management tool. Risk-neutral producers see a 12.1% increase in certainty equivalent wealth compared to 12.5% for moderately risk-averse producers. Introducing catastrophic price risk increases risk-averse producers' expected benefits to 21.8%. Actuarially fair program premiums and implied subsidies are also estimated. These results demonstrate that AgriStability is highly subsidized. Finally, benefits from supplementary catastrophic revenue insurance are calculated and discussed, along with several additional structural features of the program". Copyright (c) 2010 Canadian Agricultural Economics Society.
Year of publication: |
2010
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Authors: | Schaufele, Brandon ; Unterschultz, James R. ; Nilsson, Tomas |
Published in: |
Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie. - Canadian Agricultural Economics Society - CAES. - Vol. 58.2010, 3, p. 361-380
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Publisher: |
Canadian Agricultural Economics Society - CAES |
Saved in:
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