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Implications of Crop Insurance for Farmers and Lenders

Published online by Cambridge University Press:  05 September 2016

David J. Leatham
Department of Agricultural Economics, Texas A&M University
Bruce A. McCarl
Department of Agricultural Economics, Texas A&M University
James W. Richardson
Department of Agricultural Economics, Texas A&M University
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The effect of the farmer's choice of crop insurance was evaluated on both the farmer's and lender's performance. This was done using whole-farm, Monte Carlo simulation for Texas wheat/sorghum operations. Results indicate crop insurance would be preferred by moderately risk-averse farmers when farm firm failure became an issue or the insurance loss ratio approached one. A lender always preferred the use of crop insurance, especially when the probability of firm bankruptcy was an issue.

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Copyright © Southern Agricultural Economics Association 1987

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