Gary D. Schnitkey

Crop Insurance Valuation under Alternative Yield Distributions

Considerable disagreement exists about the most appropriate characterization of farm-level yield distributions. Yet, the economic importance of alternate yield distribution specifications on insurance valuation, product designs and farm-level risk management has not been investigated or documented. The results of this study demonstrate that large differences in expected payments from popular crop insurance products can arise solely from the parameterization chosen to represent yields. The results suggest that the frequently unexamined yield distribution specification may lead to incorrect conclusions in important areas of insurance and risk management research such as policy rating, and assessment of expected payments from policies.

Evaluation of risk reductions associated with multi‐peril crop insurance products

This study evaluates the impacts on gross revenue distributions of the use of alternative crop insurance products across different coverage levels and across locations with differing yield risks. Results are presented in terms of net costs, values‐at‐risk, and certainty equivalent returns associated with five types of multi‐peril crop insurance across different coverage levels. Findings show that the group policies often result in average payments exceeding their premium costs. Individual revenue products reduce risk in the tails more than group policies, but result in greater reductions in mean revenues. Rankings based on certainty equivalent returns and low frequency VaRs generally favor revenue products. As expected, crop insurance is associated with greater relative risk reduction in locations with greater underlying yield variability.

A Spatial Equilibrium Analysis of Regional Structural Change in the U.S. Dairy Industry

During the past 25 years, regional distribution of U.S. milk production has changed as production in the South and West has grown. This changing regional distribution of production is often cited as a contributing factor to regional discord in the U.S. dairy industry (e.g., Blayney and Southard). The impact of various factors on the regional distribution of milk production has been analyzed. These factors include: federal milk marketing orders (McDowell; Schiek), federal price support policy (Hallberg et al.; McDowell), prices and associated elasticities of raw milk, milk products, and production inputs (Ruane and Hallberg; Batista; Chavas, Kraus, and Jesse; and Weersink and Howard), new technologies (Weersink and Tauer), and demand variables (Ruane and Hallberg). Each of these studies provides insight into the impact of one or two variables upon the changing regional distribution of U.S. milk production. However, without a common data base and analytical technique, it is difficult to compare the relative importance of supply, demand, and policy variables on regional distribution of U.S. milk production. Such a comparative analysis is the focus of this study. Results of this analysis should be of interest to milk producers, consumers, dairy product manufacturers, dairy cooperatives, and policy makers as they adjust to the changing regional distribution of milk production.

Farm Accounting Systems and Information Usage

Multinominal logit regressions were used to analyze differences in farmers accounting methods. Accounting methods differed by farm types, farm size, farmer education level, and accounting report uses. Farms using accounting reports for decisionmaking tended to have more complex accounting systems and produced more reports.

Milk Assembly Costs in the Greater Ohio Area: A Multiproduct Analysis

The economics of raw milk assembly is examined. The hauling technology is described as a multiple output process with road miles and volume by weight hauled as the outputs produced by the hauling firms. A translogarithmic total cost function is estimated using survey data from the greater Ohio milk production region. The relative share of total cost is substantially lower for the volume hauled output relative to the distance driven outputs. Current hauling rate schedules strictly based on volume, or on volume per mile driven, substantially overcharge large volume dairy producers and under-charge small volume producers.

Scheduling efficiencies of Farm‐to‐plant milk collection in Western Ohio

We examined the efficiency of farm-to-plant milk collection in western Ohio. Results suggest that mileage reductions of 10% are possible by reordering farm stops while collecting loads of milk. A further 3% reduction is possible by moving dairy farms between loads. When examining efficiencies, guaranteed lowest mileage (GLM) and heuristic algorithms were used to generate schedules. Heuristic algorithms account for about 80% of the mileage reductions identified by GLM algorithms. GLM algorithms are computationally feasible for ordering farm stops while collecting milk loads. However, heuristic algorithms must be relied on for moving dairy farms between loads.

Selected US farm machinery market characteristics and their implications for the future

Trends in farm machinery use suggest the US farm machinery market is a replacement market. Moreover, since 1960, the price of machinery has risen relative to prices for other production inputs. Econometric analysis suggests that higher relative machinery prices encourage input substitution. Thus, relative price trends should be a major concern to the machinery industry. The analysis also suggests that demand for machinery is elastic, meaning that lower prices could produce higher gross sales. Last, annual machinery purchases by farmers will likely remain variable because factors influencing purchases are variable. Therefore, reducing factory and dealer inventories could produce lost sales.

A dynamic analysis of management strategies for Alberta hog producers

In this paper, we examine risk reductions possible by including off-farm assets with farm assets in a firm growth context. We specify a dynamic investment model in which an individual can invest in hog fmishing barns, stocks, and fmancial holdings. We solve this model for an Alberta hog fmisher using alternative objective functions representing different types of risk preferences. Our results indicate that holding stocks is an effective means of reducing risks and increasing wealth. -