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How U.S. Farm Programs and Crop Revenue Insurance Affect Returns to Farm Land
Author(s) -
Gray Allan W.,
Boehlje Michael D.,
Gloy Brent A.,
Slinsky Stephen P.
Publication year - 2004
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1111/j.1467-9353.2004.00173.x
Subject(s) - crop insurance , revenue , affect (linguistics) , business , agricultural economics , agricultural science , crop , economics , natural resource economics , agriculture , finance , environmental science , forestry , geography , archaeology , linguistics , philosophy
A simulation model incorporating price and yield variability is used to examine the impact of government farm program and crop revenue coverage (CRC) insurance payments on the probability distribution of returns to land. Results indicate that Marketing Loan Program payments have the greatest impact on both the mean and standard deviation of returns. Agricultural Market Transition Act payments shift the distribution of returns without changing the variability, creating a reduction in relative risk. Market loss assistance payments increase the mean, reduce variability, and increase skewness. When combined, farm programs substantially increase the value that risk‐averse producers place on the residual returns to land and substantially reduce the certainty equivalent value of CRC.