Rate setting procedures for United States crop yield and revenue insurance contracts employ methods that presume correlations to be state invariant. Whether this is true matters. If yield-yield correlations strengthen when crops are subject to widespread stress, then diversification...

The effect of sampling error in estimation of farmers' mean yields for crop insurance purposes is explored using farm-level corn yield data in Iowa from 1990 to 2000 and Monte Carlo simulations. We find that sampling error combined with nonlinearities in the insurance indemnity function will...

Increased crop insurance subsidies have increased the demand for insurance at coverage levels higher than the traditional level of 65 percent. Premium rates for higher levels of yield insurance under the Federal Actual Production History (APH) program equal the premium rate at the 65 percent...

The Agricultural Risk Protection Act greatly increased the expected marginal net benefit of farmers buying high-coverage crop insurance policies by coupling premium subsidies to coverage level. This policy change, combined with cross-sectional variations in expected marginal net benefits of...

A large empirical literature exists seeking to identify crop yield distributions. Consensus has not yet formed. This is in part because of data aggregation problems but also in part because no satisfactory motivation has been forwarded in favor of any distribution, including the normal. This...

The successful expansion of the U.S. crop insurance program has not eliminated ad hoc disaster assistance. An alternative currently being explored by members of Congress and others in preparation of the 2007 farm bill is to simply remove the "ad hoc" part of disaster assistance programs by...

While the preponderance of empirical studies point to negative crop yield skewness in a wide variety of contexts, the literature provides few clear insights on why this is so. The purpose of this paper is to make three points on the matter. We show formally that statistical laws on aggregates do...

The Agricultural Risk Protection Act (ARPA) has largely met its objectives of inducing farmers to increase their use of the crop insurance program. Both insured acreage and coverage levels have increased dramatically in response to ARPA's large increase in premium subsidies. An unintended...

The modeling of price risk in the theory and practice of commodity risk management has been developed far beyond that of crop yield risk. This is in large part due to the use of plausible stochastic price processes. We use the Pólya urn to identify and develop a model of the crop yield...

While controversy surrounds skewness attributes of typical yield distributions, a better understanding is important for agricultural policy assessment and for crop insurance rate setting. Day (1965) conjectured that crop yield skewness declines with an increase in low levels of nitrogen use, but...