Probabilistic Modeling of Catastrophic Weather Risks: Implications for Indemnification Plans for Animal Waste Spills

Replaced with revised version of paper 08/24/07.Livestock Production/Industries, Risk and Uncertainty,

Analyzing the Effects of Weather and Biotechnology Adoption on Corn Yields and Crop Insurance Performance in the U.S. Corn Belt

Favorable weather and the adoption of Genetically Modified (GM) corn hybrids are often argued to be factors that explain recent corn yield increases and risk reduction in the U.S. Corn Belt. The focus of this analysis is to determine whether favorable weather is the main factor explaining increased and more stable yields or if biotechnology adoption is the more relevant driving force. The hypothesis that recent biotechnology advances have increased yields and reduced risks by making corn more resistant to pests, pesticides, and/or drought is tested. Fixed effects models of yields and crop insurance losses as functions of weather variables and genetically modified corn adoption rates are estimated taking into account the non-linear agronomic response of crop yields to weather. Preliminary results show that genetically modified corn adoption rates, especially insect- resistant corn adoption, have had a significant and positive effect on average corn yields in the U.S. Corn Belt over the last years. Furthermore, genetically modified corn adoption has not only increased corn's tolerance to extreme heat but has also improved corn's tolerance to excessive and insufficient rainfall.Crop Production/Industries, Farm Management,

Analyzing the Effects of Weather and Biotechnology Adoption on Corn Yields and Crop Insurance Performance in the U.S. Corn Belt

Favorable weather and the adoption of Genetically Modified (GM) corn hybrids are often argued to be factors that explain recent corn yield increases and risk reduction in the U.S. Corn Belt. The focus of this analysis is to determine whether favorable weather is the main factor explaining increased and more stable yields or if biotechnology adoption is the more relevant driving force. The hypothesis that recent biotechnology advances have increased yields and reduced risks by making corn more resistant to pests, pesticides, and/or drought is tested. Fixed effects models of yields and crop insurance losses as functions of weather variables and genetically modified corn adoption rates are estimated taking into account the non-linear agronomic response of crop yields to weather. Preliminary results show that genetically modified corn adoption rates, especially insect- resistant corn adoption, have had a significant and positive effect on average corn yields in the U.S. Corn Belt over the last years. Furthermore, genetically modified corn adoption has not only increased corn's tolerance to extreme heat but has also improved corn's tolerance to excessive and insufficient rainfall

Probabilistic Modeling of Catastrophic Weather Risks: Implications for Indemnification Plans for Animal Waste Spills

This paper presents probabilistic and economic models of two dimensions of catastrophic weather risks that are important factors underlying lagoon failures and waste spills in North Carolina-hurricane risks and the risks associated with significant cumulative rainfall. Hurricane strike and excessive cumulative rainfall probabilities are estimated for the entire state. Expected losses, which represent actuarially-fair insurance premium rates for a plan that would indemnify producers against damages from lagoon failures, are evaluated. Results imply annual premiums ranging from under $100 per year to over$2,062 per year. An interesting result is that those areas with the highest levels of expected loss are also those areas with the greatest concentration of waste lagoons

COTTON SUPPLY RESPONSE IN BRAZIL: TRADITIONAL VS. EXPANSION REGION

A regional linear supply system acreage allocation model is estimated for Brazil's four dominant field crops (cotton, soybeans, corn and rice) for the emerging cotton production region of the central-west Cerrado Savannah, and the traditional Southeast and Northeast cotton production regions. Scale and cross price elasticities are estimated for all regions

Public Responses to Agricultural Disasters: Rethinking the Role of Government

"We provide a broad overview of the role and history of federal disaster relief in U.S. agriculture. We discuss various economic arguments that may be used as justification for such disaster relief and subsidized insurance programs. In general, we find no persuasive argument that market failure justifies subsidized risk management activities by the government. Important exceptions exist in the case of catastrophic damages to public infrastructure, invasive and communicable disease threats, and the hazards posed by accidental or deliberate contamination of food supplies in that the presence of significant transactions costs may inhibit private market solutions. We also consider a panel VAR analysis of the dynamic interrelationships among market returns and farm program payments conveyed under three different types of programs-disaster assistance, crop insurance, and all other direct payments. An important finding is that disaster and insurance payments appear to imply higher subsequent levels of market income risk in agriculture. This finding is consistent with arguments that subsidized disaster assistance and insurance may lead to greater risk in agriculture." Copyright 2007 Canadian Agricultural Economics Society.