Marketing and crop insurance: a portfolio approach to risk management for Illinois corn and soybean producers

摘要

Little research has focused on understanding how crop insurance and preharvest pricing interact so as to reduce risk or increase returns more than either if used separately. Farm-level historical simulations from 1976 through 2008 were used to analyze several marketing strategies that use both preharvest pricing and revenue based crop insurance products for corn and soybean producers in four regions of Illinois. Results indicate preharvest pricing and revenue based crop insurance, when used together, can significantly reduce risk, and in some cases increase returns. Results also indicate mechanical (passive) preharvest pricing strategies outperform dynamic (active) preharvest pricing strategies by decreasing risk and in some cases increasing returns.