Beef Producer Preferences for Various Livestock Revenue Protection Products: A Conjoint Approach

The federal government has recently approved legislation to develop revenue insurance products that are affordable and user-friendly for livestock producers. The features of the products will be the ultimate determinant of product acceptance among producers. The objective of the study was to determine the relative importance of livestock revenue insurance product attributes as well as to identify the characteristics of beef cattle producers who prefer certain levels of a given product attribute. Conjoint analysis was utilized to determine the importance of selected attributes. Conjoint Designer was used to develop eleven hypothetical insurance products from four attributes with three levels each. Producers rated each product from 0 (least preferred) to 10 (most preferred). The products were rated given four different economic scenarios to determine the influence of the cattle cycle on producers' preferences and purchase decisions for products. Data were collected via personal interviews with 52 beef cattle producers in 15 parishes in Louisiana. A two-limit tobit model was used to analyze producer preferences. The part worth utility values estimated were used in a cluster analysis to segment producers based upon their preferences. Univariate probit models were estimated for nine products to evaluate the influence of various producer characteristics on purchase decisions.The results of the aggregate conjoint analysis indicated that producers preferred products with a $2.24|$0.00/cwt premium|deductible, a 180-day policy length, a state price series, and an in-person method of marketing. The price series made the largest contribution to the preference rating, and the results suggested that the economic scenario did not significantly impact preferences. The cluster analysis identified three market segments that exhibited significant differences in primary source of income, farm size, marketing strategies used, and risk attitude. The results of the univarite probit models revealed that the economic scenarios had a significant impact on producers' insurance purchase decision. Producers who were risk averse and depended on income from beef cattle were more likely to purchase insurance. Producers who were older and/or had other means of mitigating risk were less likely to purchase insurance.