Abstract
This paper studies the selection of optimal crop insurance under climate variability and fluctuating market prices. A model was designed to minimize farmers' expected losses (including insurance costs) while using the conditional-value-at-risk measure to acquire the risk-aversion level. The application of the model was illustrated by studying a farm with two crops (cotton and peanut) in Jackson County, Florida. The climate variability was caused by ENSO phenomenon. Crop-insurance contracts with minimized losses were 75% actual production history (APH) during El Niño and neutral years and 65% APH during La Niña years for peanut and 75% APH in all ENSO phases for cotton. In addition, risk-averse farmers could select 75% APH for peanut during La Niña years as a means of attaining less expected loss.
| Original language | English |
|---|---|
| Pages (from-to) | 2572-2580 |
| Number of pages | 9 |
| Journal | Journal of Applied Meteorology and Climatology |
| Volume | 47 |
| Issue number | 10 |
| DOIs | |
| State | Published - 2008 |
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