Issue
Volume 44, Issue 1, January 2019
Using historical yield and rainfall data from three university-managed ranches in Kansas and Nebraska, we measure basis risk of Rainfall Index Insurance for Pasture, Rangeland, and Forage (PRF-RI). We investigate the relationship between forage yield and monthly precipitation and estimate the relationship between forage yield and PRF-RI indices. Finally, we estimate basis risk of PRF-RI. Our estimates suggest that using actual site-level precipitation values would reduce basis risk by only 5%–9%, indicating that basis risk stems mostly from nonprecipitation factors. Using more flexible contract forms with site-level precipitation would have little impact on decreasing the degree of basis risk.
Groundwater is a valuable input to agricultural production in many areas, but its use imposes external costs on nearby producers. Little attention has been given to externalities that directly affect groundwater productivity. We develop a dynamic, spatially-explicit model of groundwater use that allows changes in saturated thickness to affect both the pumping cost and productivity of nearby wells.We compare gains from coordinated, socially optimal groundwater use to those that result from a user pursuing unilateral optimization. For wells with average saturated thickness, both unilateral and coordinated optimization can moderately increase the net present value of resource rents.
The 2014 Farm Bill offered producers a choice of programs to assist in risk management. Helping producers understand their choices among three programs, all with uncertain payouts determined by different factors, was a sizable challenge to extension economists tasked with providing Farm Bill education. Survey data collected at extension meetings were analyzed, and findings suggest that in-person extension education influences people’s decisions, especially with regard to uncertain outcomes like commodity prices, yields, and program payments. The finding that more experienced producers consistently chose one of the programs may have implications for policy impacts that differ across producer demographic groups.