Farm-Level Analysis of Risk Management Proposals, March 2000

This paper presents a detailed report of the representative farm analysis (summarized in FAPRI Policy Working Paper #01-00). At the request of several members of the Committee on Agriculture, Nutrition, and Forestry of the U.S. Senate, we have continued to analyze the impacts of the Farmers’ Risk Management Act of 1999 (S. 1666) and the Risk Management for the 21st Century Act (S. 1580). Earlier analysis reported in FAPRI Policy Working Paper #04-99 concentrated on the aggregate net farm income and government outlay impacts. The representative farm analysis is conducted for several types of farms, including both irrigated and non-irrigated cotton farms in Tom Green County, Texas; dryland wheat farms in Morton County, North Dakota and Sumner County, Kansas; and a corn farm in Webster County, Iowa. We consider additional factors that may shed light on the differential impacts of the two plans. 1. Farm-level income impacts under alternative weather scenarios. 2. Additional indirect impacts, such as a change in ability to obtain financing. 3. Implications of within-year price shocks. Our results indicate that farmers who buy crop insurance will increase their coverage levels under S. 1580. Farmers with high yield risk find that the 65 percent coverage level maximizes expected returns, but some who feel that they obtain other benefits from higher coverage will find that the S. 1580 subsidy schedule significantly lowers the cost of obtaining the additional coverage. Farmers with lower yield risk find that the increased indemnities from additional coverage will more than offset the increase in producer premium. In addition, because S. 1580 extends its increased premium subsidy percentages to revenue insurance products, farmers will have an increased incentive to buy revenue insurance. Differences in the ancillary benefits from crop insurance under the baseline and S. 1580 would be driven by the increase in insurance participation and buy-up. Given the same levels of insurance participation and buy-up, the ancillary benefits under the two scenarios would be the same.

Native Grassland Conversion: the Roles of Risk Intervention and Switching Costs

We develop a real option model of the irreversible native grassland conversion decision. Upon plowing, native grassland can be followed by either a permanent cropping system or a system in which land is put under cropping (respectively, grazing) whenever crop prices are high (respectively, low). Switching costs are incurred upon alternating between cropping and grazing. The effects of risk intervention in the form of crop insurance subsidies are studied, as are the effects of cropping innovations that reduce switching costs. We calibrate the model by using cropping return data for South Central North Dakota from 1989 to 2012. Simulations show that a risk intervention that offsets 20% of a cropping return shortfall increases the sod-busting cost threshold, below which native sod will be busted, by 41% (or $43.7/acre). Omitting cropping return risk across time underestimates this sod-busting cost threshold by 23% (or $24.35/acre), and hence underestimates the native sod conversion caused by crop production.

Transverse Cracking Study of Asphalt Pavement, HR-1020, 1981

At a pavement management study meeting in Omaha, Nebraska, September 12 and 13, 1979, the states of Iowa, Kansas and Nebraska agreed on the need for an in-depth engineering study of thermal cracking of bituminous pavement. In addition, the states of Oklahoma and North Dakota agreed to participate in the study. The scope of the study was to analyze all functions relating to the thermal cracking problem to determine how different uses of preventative materials, mix design measures, maintenance repairs, and design of bituminous pavements and overlays might be contributing to the problem and to determine what improvements might be made in these procedures to reduce the problem of thermal cracking. This publication describes the study and its conclusions. One of the conclusions is that the study did not address what the authors believe to be the major contributor to transverse cracking - the subgrade and subbase.

Transverse Cracking of Asphalt Pavements, HR-1040, Summary Report, 1982

This report summarizes the analysis of transverse cracking in asphalt pavement by a five state study team from Iowa, Kansas, Nebraska, North Dakota, and Oklahoma. The study was initiated under the sponsorship of the Federal Highway Administration and four evaluation conferences were held during the course of the study. Each state conducted a crack inventory on their asphalt pavement. An effort was made to correlate this inventory with numerous factors that were considered to be pertinent to the cracking problem. One state did indicate that there was a correlation between transverse cracking severity and the subsurface geology. The other states were unable to identify any significant factors as being the primary contributors. The analysis of the problem was divided into, (1) mix design, (2) maintenance, and (3) 3R rehabilitation. Many potential factors to be considered were identified under each of these three study divisions. There were many conclusions as to good and bad practices. One major conclusions was that a more effective crack maintenance program with early sealing was essential. Some new practices were suggested as potentially more cost effective in design, construction and maintenance. The interchange of methods and procedures by individual states yielded benefits in that other states selected practices that would be an improvement to their program.