Risk Reduction Under An Area Yield-Based Crop Insurance Plan for Southcentral Kansas Winter Wheat

This study compares the effectiveness of two crop insurance plans: an individual farm-yield measurement similar to the current Federal Crop Insurance Corporation multi-peril program and an area-yield measurement method. These methods are examined for reduction in yield and gross farm income variability, including deficiency payments, using farm-level wheat yield data from 100 southcentra1 Kansas farms. Although an individual farm-level measurement plan is complex and suffers from moral hazard and adverse selection problems, it provides more gross farm income risk reduction than an area plan.