This paper examines the impact of crop insurance provisions on planting decisions made by cotton farmers in the Texas Coastal Bend area for the 2006 crop year. This analysis is carried out by examining the relative expected returns from cotton and feed grain crops in the situation where inadequate soil moisture exists to establish stands at planting time.

This analysis compares expected results of the prevented planting and dry planting of cotton and feed grain crops with existing crop insurance provisions in the Texas Coastal Bend, and how those expected returns impacted planting decisions. Simulation analysis is used to examine the risk involved with both prevented planting and dry planting options.

The increase in cotton acreage planted in 2006 in this area, despite relatively low cotton prices and relatively high input costs would not be expected without other influences, such as the crop insurance program provisions. Through this analysis, an examination of the changes in acreage planted to cotton and feed grain crops in the Coastal Bend as well as the Río Grande Valley that was seen in 2006 can be explained.