Whole farm revenue insurance as a new model of risk management in agriculture

Marković, Todor; Kokot, Željko

doi:10.5937/ratpov55-14941

Cited by 5 publications

(9 citation statements)

References 5 publications

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“…Increasing competition with third world countries is met through the reduction of production costs—mainly reducing labor and transportation costs [4,5]. Other costs, derived from crop insurance and greenhouse structures, are increasingly common among fixed costs, of a financial nature, on agricultural farms [6,7].…”

Section: Introductionmentioning

confidence: 99%

Profit Analysis of Papaya Crops under Greenhouses as an Alternative to Traditional Intensive Horticulture in Southeast Spain

Honoré

Ureña

Navarro-Velasco³

et al. 2019

IJERPH

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The high-yield agricultural model in Almería is based on eight different crops. Having led fruit and vegetable exports in Spain for more than 50 years, a decrease in melon and watermelon growing areas in Almería caused a change in supply that affected the model’s profit. Papaya cultivation could reactivate the profit of the agricultural model in Almería and also improve the available product range. The papaya crop needs greenhouse infrastructures high enough to contain the growth and size of the plants during a cycle crop, which is possible in most of the greenhouses of the Horticultural production model of Almería. The papaya harvests obtained in the region meet the quality requirements demanded by European markets. Furthermore, yields obtained are equal or higher than yields obtained by other producing countries. This crop improves profit compared with the profit obtained from the rotation of other horticultural crops that have been traditionally grown in the region.

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Section: Introductionmentioning

confidence: 99%

Profit Analysis of Papaya Crops under Greenhouses as an Alternative to Traditional Intensive Horticulture in Southeast Spain

Honoré

Ureña

Navarro-Velasco³

et al. 2019

IJERPH

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“…Thanks to our findings, the paper provides a theoretical and practical contribution to the lively debate on risk management in agriculture. It is theoretical as this work enriches the current literature on income stabilisation (Skees et al 1998;Dismukes and Coble 2007;Zhu et al 2008;Trestini et al 2017;Markovic and Kokot 2018;Severini et al 2019). Given the growing importance of considering, not only the risks related to adverse weather conditions, but also other types of risk, we analysed contracts covering the loss caused by a combination of yield reduction due to climate adversity and market price reductions.…”

Section: Discussionmentioning

confidence: 93%

“…We studied this topic by considering a new model of risk management in agriculture, starting from the considerations of Markovic and Kokot (2018). Those authors present a novel insurance model that has been applied in the USA since 2015.…”

Section: Introductionmentioning

confidence: 99%

“…The emergence of modern risk management in agriculture is becoming increasingly focused on insuring total farm revenue (Turvey 2012). The aim of whole-farm insurance is to cover all risks that threaten the farm under a unique insurance policy, according to Markovic and Kokot (2018). Although multiple risks are considered simultaneously, this approach may be more efficient, but also more complicated, as shown by Huirne et al (2007).…”

Section: Introductionmentioning

confidence: 99%

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A New Tool for Covering Risk in Agriculture: The Revenue Insurance Policy

Frascarelli

Sarto

Mastandrea

2021

Risks

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Over the last years, the agricultural sector has faced increasing risks related not only to production activities, but also to climate adversity and a higher frequency of extreme events. These factors, combined with increased price volatility in the markets, have caused greater exposure to risk for farmers. For this reason, risk management in agriculture has taken on an important role within the Common Agricultural Policy. However, in recent years, gradual disaffection of farmers, low penetration of insurance in the arable sector, and a greater need for insurance coverage against market risks have characterised the subsidised risk management system. For all these reasons, starting in 2017, the National Agricultural Insurance Plan has provided new possibilities for covering risks. This paper aims to contribute to the debate on risk management linked to the revenue insurance policy recently adopted in Italy. Using data from the Italian Farm Accountancy Data Network, we simulate the application of the revenue insurance policy with a sample of Italian farms operating in the common and durum wheat sectors. The main findings show that the revenue insurance policy stipulation is, overall, sustainable for both farms and insurance companies.

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“…While the crop choice is simultaneously influenced by the presence of all agricultural insurance programs because one insurance policy guarantees all plants from all risks. Therefore, the WFI company and the insured must balance several random variables, including yield and price risks and their correlation (Markovic and Kokot, 2018;Turvey, 2012).…”

Section: Introductionmentioning

confidence: 99%

Household margin insurance of agricultural sector in Indonesia using a farmer exchange rate index

Ahdika

Rosadi

Effendie

et al. 2020

AFR

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PurposeFarmer exchange rate (FER) is the ratio between a farmer's income and expenditure and is also an indicator of farmers’ welfare. There is little research regarding its use in risk modeling in crop insurance. This study seeks to propose a design for a household margin insurance scheme of the agricultural sector based on FER.Design/methodology/approachThis research employs various risk modeling concepts, i.e. value at risk, loss models and premium calculation, to construct the proposed model. The standard linear, static and time-varying copula models are used to identify the dependency between variables involved in calculating FER.FindingsFirst, FER can be considered as the primary variable for risk modeling in agricultural household margin insurance because it demonstrates farmers’ financial ability. Second, temporal dependence estimated using the time-varying copula can minimize errors, reduce the premium rate and result in a tighter guarantee's level of security.Originality/valueThis research extends the previous similar studies related to the use of index ratio in margin insurance loss modeling. Its authenticity is in the use of FER, which represents the farmers' trading capability. FER determines farmers’ losses by considering two aspects: the farmers’ income rate and their ability to fulfill their life and farming needs. Also, originality exists in the use of the time-varying copulas in identifying the dependence of the indices involved in calculating FER.

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Whole farm revenue insurance as a new model of risk management in agriculture

Cited by 5 publications

References 5 publications

Profit Analysis of Papaya Crops under Greenhouses as an Alternative to Traditional Intensive Horticulture in Southeast Spain

Profit Analysis of Papaya Crops under Greenhouses as an Alternative to Traditional Intensive Horticulture in Southeast Spain

A New Tool for Covering Risk in Agriculture: The Revenue Insurance Policy

Household margin insurance of agricultural sector in Indonesia using a farmer exchange rate index

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