Understanding Irrigated Cotton Producer’s Crop Insurance Coverage Level Choices Under the 2014 Farm Bill

Abstract

The Agricultural Act of 2014 (2014 Farm Bill) significantly changed the Title I commodity programs, and shallow loss insurance programs were added to the federal crop insurance program (Title XI). Stacked Income Protection Plan and Supplemental Coverage Option were new insurance programs enacted in the 2014 Farm Bill. Participation in these programs is influenced by premium subsidies and the type of coverage provided. Relationships between insurance agents and producers also have the potential to influence program participation. These changes could impact the producer’s insurance choice decision. The overall objective of this research is to understand the impact of the new insurance options on Texas cotton producers’ risk management decisions and participation and understand the change in coverage level of primary crop insurance due to availably of other protection. A mail survey was conducted among cotton producers in Texas to collect insurance choices data for 2014 and anticipated choices for 2015. Responses from 42% of Texas counties were received. In 2015, the USDA Risk Management Agency reported 155 counties in Texas produced cotton. Regression analysis conducted on anticipated change in coverage level of crop insurance indicated Common Crop Insurance Policy coverage level choice for larger farm size and higher non-farm income had an increase in coverage level effect; whereas enterprise unit, revenue protection, price, yield, and insurance agents had a decrease in coverage level effect. Results suggest that greater insurance agent involvement in program design and implementation of an insurance program could contribute to program success.