An Evaluation of the Effects of Changes in the AgriStability Program on Producers’ Crop Activities

The major change of relevance to the current research concerned AgriStability, where the margin necessary to trigger a payout changed from 85% of the reference margin to 70%, and the method for calculating the reference margin was revised so that farmers could choose the lesser of the historic average program margin (as in GF) or a margin based on historical average of allowable expenses (determin [...] The change in the AgriStability payout trigger (from 0.85 to 0.7) does not further distort farmers’ land allocation decisions while the amount of saved indemnity is higher than the amount of the reduction in farmers’ expected profit at the average level. [...] After calibrating the parameters of the quadratic cost functions for all representative farms, we iterate the value of risk aversion coefficient to find a range for each farm to reproduce the land allocations of the base run without the 11 | P a g e calibration constraints for each crop. [...] Although discussion about the impacts of changes on farmers appeared before and after the launch of GF2, including arguments about the estimated reduction in indemnities and reduced attractiveness to farmers, there has been little research on the effect that changes in the policy parameters, including the compensation rate and the payment trigger, have on farmers’ production decisions and overall [...] We find that the change in going from GF to GF2 affects the number of triggered payouts, the actuarially sound premium for the program, and the farmers’ expected gross margin.