WHOLE FARM REVENUE INSURANCE AS A NEW MODEL OF CROP INSURANCE

Agricultural production is a specific area of business that is strongly influenced by natural, climatic, market, financial and institutional factors. These are all hazards not depending on the will of man and his activities, and it is necessary to foresee them and to insure against them. Crop and fruit insurance is the most effective risk management instrument in open field crop production. The aim of this paper is to present a new model of crop insurance which began to apply in 2015 in the United States. Every farm, by its implementation, provides farm’s expected total revenue that may be affected by the operation of both natural and climate risks, and market risks too, which are manifested through fluctuations in market prices. In this way all farm crops are insured against any risks with just one policy. Analyzed farm has experienced revenue loss due to drought, therefore it has indemnity right in the amount of 2,500 €. Premium costs amount to 330 €

Economic and legal aspects of sunflower insurance using the model of regional index

The application of index insurance in agriculture is becoming more and more popular in the last few years, especially in developed countries. Index insurance of crops and fruits is based on data related to a particular administrative unit or region. The regional index represents the average yield or average revenue in a region that is the basis for calculating the premium and insurance compensation. In the case of sunflower production, one of the most frequent crops in the region of Kula municipality, the authors show the methodology of applying the analysed insurance. The main advantage of this insurance model can be the facts that there is no need to estimate the damage, as well as a drastic reduction in morale-hazard. This insurance model can be a significant alternative to classical insurance and its implementation should result in an increase in the number of insured and insured areas. Firstly, it is necessary to remove the potential legal dilemmas about the implementation of this insurance model in Serbia and to define more precisely some legal institutions in this area

Profitability of carp production in Macedonia and Serbia

Macedonia and Serbia are countries with long tradition in freshwater carp production. In this study, the aim is to assess the carp fish production economics, with particular focus on profitability. The findings revealed that carp production is profitable in both cases, though with better returns in the Macedonian case with the rate of profitability being 17.18%, in comparison to 8.10% at the Serbian farm. The full cost of production per kg is €2.56 and €2.25 in Macedonia and Serbia, respectively. The current profitability levels are highly sensitive to market price fluctuations, and there is considerable room for yield improvement and costs reductions

Analysis of Investment and Insurance in Orange Production: A Case Study for Turkey

In agricultural production, there are risks and uncertainties arising from production, market, financing, technology, policy and climate conditions. For this reason, it is of special importance to consider risk and uncertainty in future management decisions in agriculture. Orange is a perennial crop and is a continuous source of income generation to the farmers. Orange growing can have three basic destinations: processing industry, domestic market and external market. Turkey is one of the most important producers of oranges on an international level and consistently increases its production. Antalya is a province with significant orange production whose share in total Turkish orange production is steadily growing. On the other hand, there is not enough research related to economic feasibility of investments in the establishment of orange plantations as well as insurance of orange production in Turkey. Therefore, the purpose of this study is to determine the level of profitability of investments in orange plantations and to examine possibilities to introduce modern insurance concepts in this type of activity. The data of the Antalya province for 2018 were obtained from the Turkish Ministry of Agriculture and Forestry (TMAF), Antalya Provincial Directorate. In order to achieve that goal, net present value, internal rate of return and benefit/cost ratio are determined. It was found that investment in the establishment of orange plantation is economically feasible having positive net present value, internal rate of return of 15.04% and a benefit/cost ratio of 1.14. In addition, we demonstrate how the use of modern insurance approaches (such as Adjusted Gross Revenue type of insurance) could be beneficial to producers involved in orange production

Whole farm revenue insurance as a new model of risk management in agriculture

Since agricultural production takes place under the open sky and it is largely unprotected, the risk of occurrence of some harmful event (hail, flood, drought, cold, storm, fire, etc.) increases. In addition to natural and climatic factors, financial, market and institutional factors have a strong effect on agricultural production. The crop and fruit insurance is certainly the most effective risk management instrument in crop production in the open air. The aim of the paper is to present an entirely new insurance model that began to apply in 2015 in the United States of America. By its application, each farm ensures its expected total revenue that can be endangered by the effects of both natural and climate, as well as market risks, which are manifested through fluctuations in market prices. This way, all crops on the farm are insured from all kinds of risks under just one insurance policy. Analyzed farm has experienced revenue loss due to drought, therefore it has indemnity right in the amount of € 2,500. Premium cost borne by farmer amounts to € 330

ECONOMIC AND LEGAL ASPECTS OF SUNFLOWER INSURANCE USING THE MODEL OF REGIONAL INDEX

The application of index insurance in agriculture is becoming more and more popular in the last few years, especially in developed countries. Index insurance of crops and fruits is based on data related to a particular administrative unit or region. The regional index represents the average yield or average revenue in a region that is the basis for calculating the premium and insurance compensation. In the case of sunflower production, one of the most frequent crops in the region of Kula municipality, the authors show the methodology of applying the analysed insurance. The main advantage of this insurance model can be the facts that there is no need to estimate the damage, as well as a drastic reduction in morale-hazard. This insurance model can be a significant alternative to classical insurance and its implementation should result in an increase in the number of insured and insured areas. Firstly, it is necessary to remove the potential legal dilemmas about the implementation of this insurance model in Serbia and to define more precisely some legal institutions in this area

Whole-Farm Revenue Protection as a Factor of Economic Stability in Crop Production

Crop production is largely unprotected and exposed to a great number of production factors. On the other hand, farmers are exposed to fluctuations in the market prices of their products every year, which often has a negative impact on the profits made. There are various risk management measures in plant production, and insurance is certainly one of the most effective instruments. One of the recent insurance models is Whole-Farm Revenue Insurance (WFRP), which is an American insurance model that has been applied since 2015. The essence of WFRP is to ensure that all crops on the farm are secured against production and market risks with only one policy. The aim of the research in this paper is to present WFRP as an entirely new model of revenue insurance on the example of a typical Serbian farm specializing in crop production. The WFRP model works by determining the insured revenue before the start of the production year. If at the end of the production year, for any reason, the realized revenue falls below the level of insured revenue, the farmer is entitled to indemnification. Due to the drought that hit the region where the analyzed farm is located, the yields were reduced, and thus the expected revenue was also reduced, and the farmer was entitled to damages of $5697. On the other hand, it is the farmer's obligation to pay$373 to the insurer as a risk transfer fee. The authors proved that even such complex insurance models can be applied in countries such as Serbia, where awareness of the importance of insurance of agricultural production is still not developed

Economic and legal characteristics of whole farm revenue insurance

Whole-farm revenue insurance represents new risk management instrument in agriculture. Whole-farm revenue insurance is a typical example of the principle of universal insurance. The goal of whole-farm revenue insurance is to unify all the risks of single farm that can be insured under a single policy. In this way, a revenue loss is covered in the case of most cultivated crops on a farm, livestock and unprocessed animal products, such as milk and wool. This type of insurance protects from low revenue due to losses in production, which are the result of a fall in product quality and market price. The aim is to provide protection against small revenue due to production losses that can be attributed to the inevitable natural disasters and market fluctuations that affect the farm revenue in the insured year. The paper deals with the legal and economic aspects of this type of insurance