Information Value of Climate‐Based Yield Forecasts in Selecting Optimal Crop Insurance Coverage
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The article reports results of nonparametric analysis of corn, cotton, and peanut yield distributions during different ENSO phases in the Southeastern United States. The focus of the analysis is on establishing ENSO-dependent differences in the yield distributions and on evaluating their implications for area-yield crop insurance. The primary hypothesis of this article is that the distributions of yields and thus expected losses depend on realizations of long-term climate cycles represented by an ENSO phase assignment, which can be categorically forecasted before planting season. A group risk plan (GRP) insurance contract is used for analysis of insurance implications of ENSO forecasts because county yields smooth idiosyncrasies of individual farm yields and thus are more representative of the systemic risk caused by climate variability. County-level annual yield series were used in the analysis. Corn, cotton, and peanuts were chosen as the most common crops grown in the Southeast.
author list (cited authors)
Nadolnyak, D., Vedenov, D., & Novak, J.