AN EXAMINATION OF DIFFERENT TYPES OF ADVERSE SELECTION IN FEDERAL CROP INSURANCE

Different types of adverse selection-type of insurance product, type of unit, type of coverage and number of actual yields reported in Federal crop insurance is examined utilizing binomial and ordered logit discrete choice models for all U.S. cotton producers, 1997-2000. The associated costs of adverse selection in U.S. cotton range from $32 Million to$359 Million for the four-year period.Risk and Uncertainty,

ESTIMATED RISK-RETURN COMPENSATIONS REQUIRED UNDER REDUCED NITROGEN USE

An analysis was made of the reduced return and increased risk of reduced nitrogen use. The data source was an 11-year set of yields for continuous and rotational cropping of corn, soybeans, and grain sorghum each fertilized at three nitrogen levels. Risk was measured as returns below a target.Crop Production/Industries,

OPTIONAL UNIT POLICY IN CROP INSURANCE

Utilizing ordered logit we examine the presence of two kinds of asymmetric information-adverse selection (intertemporal variability) and moral hazard (interspatial and/or residual variability) as revealed by the choice of optional units in Federal crop insurance utilizing Risk Management Agency's 1996-2000 cotton yield and loss data files. Further, a tobit model is estimated to examine the factors explaining the loss cost ratio from Risk Management Agency perspective. Potential costs of adverse selection and/or moral hazard in optional unit provision are estimated to be as high as $180 million in US cotton over the 1996-2000 period. Keywords: Adverse Selection, Moral Hazard, Optional Unit Policy, Crop Insurance, U.S. Cotton, Logit and Tobit models.Adverse Selection, Moral Hazard, Optional Unit Policy, Crop Insurance, U.S. Cotton, Logit and Tobit models., Risk and Uncertainty,

Did 1933 New Deal Legislation Contribute to Farm Real Estate: Temporal and Spatial Analysis

The proportions of land values generated by farm program payments and farm returns are examined using an extended income capitalization model. The extended income capitalization model addresses the identification issue introduced by the counter-cyclical nature of farm program payments and farm returns. Procedures are presented that allow the estimation of agriculture land value shares without requiring explicit knowledge or assumptions with respect to the net land rental shares of farm returns or farm program payments. Results from the panel recursive or triangular-structure simultaneous equation model applied to 48 states in the U.S. for the period 1938 to 2006 indicate on average 41-45.6 percent and 54.4-59 percent of the agricultural land values can be identified with farm program payments and farm returns respectively. Spatially, at the resource regional level the contribution of farm program payments was as low as 16.8 percent in Eastern Upland region compared to a high of 51 percent in the Southern Plains region.Farm programs payments, Land values, Extended income capitalization model, Panel recursive/triangular structure simultaneous equation model, Resource regional analysis, U.S. State-level data, 1938-2007., Agricultural Finance, Farm Management,

FARM AND NONFARM FACTORS INFLUENCING FARM SIZE

The impact of the price of capital, nonfarm employment opportunities, and returns in agriculture on farm size was analyzed. A 10 region panel model using data for 1950-2000 was used. The impact of agricultural government payments was also examined. The results demonstrated the capital-labor substitution phenomenon and the importance of nonfarm employment changes.Farm Size, Capital-Labor Substitution, Nonfarm Impacts, Industrial Organization,

Aggregation Issues in the Estimation of Linear Programming Productivity Measures

This paper demonstrates the sensitivity of the linear programming approach in the estimation of productivity measures in the primal framework using Malmquist productivity index and Malmquist total factor productivity index models. Specifically, the sensitivity of productivity measure to the number of constraints (level of dis-aggregation) and imposition of returns to scale constraints of linear programing is evaluated. Further, the shadow or dual values are recovered from the linear program and compared to the market prices used in the ideal Fisher index approach to illustrate sensitivity. Empirical application to U.S. state-level time series data from 1960-2004 reveal productivity change decreases with increases in the number of constraints. Further, the input and output shadow or dual values are skewed, leading to the difference in the productivity measures due to aggregation.Aggregation, Share-weights, single and multiple output and input, Malmquist productivity index, Malmquist total factor productivity index, Agribusiness, Production Economics,

A STATISTICAL EXAMINATION OF YIELD SWITCHING FRAUD IN THE FEDERAL CROP INSURANCE PROGRAM

An over-parameterized statistical yield-switching-fraud model is developed. Over-parameterized procedures are reviewed. Five percent of 206,952 producers (thirteen percent in one state) have suspicious yield patterns, elect higher coverage, and increase total multiple-unit indemnifications up to ten percent in some states and up to 30 percent at some coverage levels.Crop Production/Industries, Risk and Uncertainty,

AN APPLICATION OF SAFETY-FIRST PROBABILITY LIMITS IN A DISCRETE STOCHASTIC FARM MANAGEMENT PROGRAMMING MODEL

A sequential decision-making model was developed, and data from farm-raised catfish production were used to demonstrate its use. Outcomes of sequences of decisions which satisfied chance constraints on ending cash balances were traced through a specified time period. Discrete choice variables were specified due to the fixed nature of pond facilities. Recourse actions specified were sale of production in excess of endogenously determined transfer levels or purchase of inputs to supplement needs of the next production stage. Production activities cannot be changed during the planning period. Only yield variability was considered due to its impact on relative competitiveness among growth stages. Deviations were calculated from endogenously determined target levels based on goal and probability limits.Farm Management,

Distributional Impacts of Country-of-Origin Labeling in the U.S. Meat Industry

Concerns about the negative effects of U.S. meat and livestock imports on domestic livestock prices have increased interest in country-of origin labeling (COOL) legislation. An equilibrium displacement model is used to estimate short-run and long-run changes in equilibrium prices and quantities of meat and livestock in the beef, pork, and poultry sectors resulting from the implementation of COOL. Retail beef and pork demand would have to experience a one-time, permanent increase of 4.05% and 4.45%, respectively, so that feeder cattle and hog producers do not lose producer surplus over a 10-year period.country-of-origin labeling, equilibrium displacement model, producer surplus, Agribusiness,

THE BIG PICTURE - SATELLITE REMOTE SENSING APPLICATIONS IN RANGELAND ASSESSMENT AND CROP INSURANCE

Livestock Production/Industries, Risk and Uncertainty,