A Comparative Evaluation of Yield Risk Reductions with Alternative Crop Insurance Programs in Manitoba

Abstract

Three crop insurance programs are evaluated in terms of their eflectiveness of yield risk reductions for 371 Manitoba farms. The examination is first conducted with a proposed index method, with which the relative yield risk reduction magnitude is calculated and compared for each farm una'er each alternative program. The generalized stochastic dominance (GSD) methodology is also used to provide an alternative analytical framework in analyzing producers ' relative preferences among those alternatives by comparing the net yield distributions generated by each program for each farm. The results suggest that, given an actuarially sound basis, the filly individualized crop insurance (FI) program is the most favorable choice for risk-averse producers. lhe area coverage and individual indemnity program (IA) is generally the second best option. The jidl area crop insurance program (FA) is least preferred by risk-averse farmers. Trois regimes d'assurance-recolte sont &valtu!s sur un &antillon de 371 fermes du Manitoba, relativement a leur aptitude d reduire les risques relies aux rendements agn'coles. On propose au prealable une m&hode d 'indexation qui permet de calculer 1 'ampleur de la diminution des risques relies au rendement et de la comparer pour chaque ferme, dans chacun des regimes. On utilise egalement la d&narche de la dominance stochastique gt%eralisee (DSG) comme cadre altematif d'analyse des preferences relatives des producteurs parmi ces trois regimes, en comparant les distributions de rendement net generees par chaque regime, pour chaque exploitation. I1 ressort des resultats que, pour autant qu 'on ait une base actuariellement solide, le regime d assurance completement individualist (FI) apparait comme le choix le plus favorable pour les producteurs circonspects. Ensuite vient le regime de protection base sur le rendement des surfaces en culture dans la region, avec indemnisation individuelle (IA). La solution qui semble attirer le moins les agriculteurs soucieux de protection u blindee w est le regime d 'assurance-recolte bask entierement sur les rendements des surfaces (FA) en culture darts la region.

Evaluating the Potential of Index Insurance Schemes to Reduce Crop Yield Risk in an Arid Region

“…Williams et al. (1993) as well as Ye and Yeh (1995) posit a farmer who can choose from various insurance schemes, but not among different numbers of insurance contracts.…”