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Farm-Level Analysis of Risk Management Proposals

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Bruce A. Babcock, Chad E. Hart, Gary M. Adams, Patrick C. Westhoff
Center for Agricultural and Rural Development (CARD)

This paper analyzes the impacts of two alternative risk management proposals, the Farmers’ Risk Management Act of 1999 (S. 1666) and the Risk Management for the 21st Century Act (S. 1580). The representative farm analysis is conducted for several types of farms, including both irrigated and non-irrigated cotton farms, dry-land wheat farms, and a corn farm. The authors look at several factors that may shed light on the differential impacts of the two plans, including farm-level income impacts under alternative weather scenarios; additional indirect impacts, such as a change in ability to obtain financing; and the implications of within-year price shocks. The study shows increased crop insurance participation under S. 1580 and increased coverage levels for both yield and revenue insurance buy-up coverage.