Analyzing Farm Program and Crop Insurance Choice Under a Risk/Return Framework

Economic returns of representative farms located in the Mississippi River delta region of the mid-south are provided for alternative commodity program and crop insurance products for corn, cotton, and soybean farms. Stochastic efficiency with respect to a function is used to provide an ordinal ranking of alternative policy bundles relative to the producer’s risk aversion bounds. Analysis is provided for the 2014 through 2018 crop years using a series of projected national marketing year prices and geographic production yields. Simulated returns are expressed as net returns above variable costs per acre to include program income and insurance indemnities. Results from this representative farm analysis suggest the preferred pairing of farm programs and crop insurance policies vary across locale and crop.