Evaluation of Crop Insurance Choices for Cotton Producers in Texas High Plains Under the 2014 Farm Bill by Constructing Representative Cotton Farm

New crop insurance coverage offered by the 2014 Farm Bill will be available to farmers beginning in 2015. Stacked Income Protection Plan (STAX) and Supplemental Coverage Option (SCO) are new crop insurance options, which are designed to protect farmers from shallow losses. STAX is only available for upland cotton producers, while SCO is available for all major farm program crops.

The objective of this project is to assess the benefits of the new crop insurance offerings for cotton producers in the Texas High Plains. Representative non-irrigated and mixed, irrigated and non-irrigated farms are being developed using consensus evaluations of panels of producers in two distinct areas of the High Plains. Our simulation analysis will examine producer welfare benefits of alternative combinations of underlying yield or revenue insurance coverage for STAX and SCO. The results should lend insight into whether producers will choose STAX or SCO and whether they will change their coverage choices on underlying policies as a result of the additional coverage offered by STAX and SCO. The results will further highlight the produces crop insurance coverage choices among low-productivity and high productivity farms.

To our knowledge this will be the first such analysis conducted using farm and county yield distributions and correlations based on producer assessments of these critical elements of the insurance decisions.