Optimizing Crop Insurance under Climate Variability

Optimizing Crop Insurance under Climate Variability

This paper studies the selection of optimal crop insurance under climate variability and fluctuating market prices. A model was designed to minimize farmers’ expected losses (including insurance costs) while using the conditional-value-at-risk measure to acquire the risk-aversion level. The applicat...

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Veröffentlicht in:Journal of applied meteorology (1988) 2008-10, Vol.47 (10), p.2572-2580
Hauptverfasser: Liu, Juan, Men, Chunhua, Cabrera, Victor E., Uryasev, Stan, Fraisse, Clyde W.
Format: Artikel
Sprache:eng
Schlagworte:
Agricultural and forest climatology and meteorology. Irrigation. Drainage
Agricultural and forest meteorology
Agricultural production
Agronomy. Soil science and plant productions
Aversion
Biological and medical sciences
Climate
Climate models
Climate variability
Commodity prices
Contracts
Cotton
Crop economics
Crop insurance
Crop production
Crops
Decision making
Economic models
El Nino
El Nino phenomena
El Nino-Southern Oscillation event
Expected utility
Farmers
Farms
Financial risk
Fundamental and applied biological sciences. Psychology
General agronomy. Plant production
Generalities. Techniques. Climatology. Meteorology. Climatic models of plant production
Growth models
Insurance
Insurance (contracts)
Insurance companies
Insurance coverage
Insurance industry
Insurance policies
La Nina
Linear programming
Market prices
Mathematical models
Optimization
Peanuts
Planting date
Pricing
Random variables
Risk aversion
Risk levels
Risk management
Southern Oscillation
Studies
Sustainable agriculture
Variability
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Zusammenfassung:This paper studies the selection of optimal crop insurance under climate variability and fluctuating market prices. A model was designed to minimize farmers’ expected losses (including insurance costs) while using the conditional-value-at-risk measure to acquire the risk-aversion level. The application of the model was illustrated by studying a farm with two crops (cotton and peanut) in Jackson County, Florida. The climate variability was caused by ENSO phenomenon. Crop-insurance contracts with minimized losses were 75% actual production history (APH) during El Niño and neutral years and 65% APH during La Niña years for peanut and 75% APH in all ENSO phases for cotton. In addition, risk-averse farmers could select 75% APH for peanut during La Niña years as a means of attaining less expected loss.
ISSN:1558-8424
0894-8763
1558-8432
1520-0450
DOI:10.1175/2007JAMC1490.1