Campus Units

Economics, Center for Agricultural and Rural Development

Document Type

Article

Publication Version

Published Version

Publication Date

4-2008

Journal or Book Title

Agricultural and Resource Economics Review

Volume

37

Issue

1

First Page or Article ID Number

51

Last Page

62

Abstract

The vast majority of crop and revenue insurance policies sold in the United States are single-crop policies that insure against low yields or revenues for each crop grown on the farm. But, increasingly, producer income is based more on the value of crops that have been converted into a value-added product such as ethanol. Moreover, the recent increases in energy and commodity price levels and volatilities emphasize the importance of risk management to ethanol investors. This paper uses an insurance approach to outline a risk management tool which mimics the gross margin level of a typical corn-based ethanol plant. The gross margin, premium, and indemnity levels are calculated on a per bushel basis to enable producers/investors to utilize the product based on their ownership share in the production facility. The fair premium rates are shown to be quite sensitive with respect to corn and energy price levels and volatilities.

Comments

This is an article from Agricultural and Resource Economics Review, 37(1) April 2008; 51-62. Posted with permission.

Copyright Owner

Northeastern Agricultural and Resource Economics Association

Language

en

File Format

application/pdf