Risk-Returns of Forward Contracting Southern Row Crops with Crop Revenue Insurance

This study evaluated the risk and return associated with various levels of forward contracting for southern row crops, specifically corn, soybean, and rice, in conjunction with different coverage levels of the Revenue Protection (RP) crop insurance program and government support plans. Forward contracting is a strategy to manage price risk by transferring ownership of physical grain from a seller to a buyer at a pre-agreed time. RP is a return-based crop insurance program offering coverage levels ranging from 50-85 percent in 5 percent increments, which allows producers to hedge against yield or price risks. Additionally, the study analyzed the effectiveness of the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) commodity programs, both of which fall under Title I of the 2014 farm bill, to support farmers during return or price declines. Finally, the expected-utility conceptual framework and certainty equivalent were utilized to quantify the risk and return during different times, level of forward contracting, and level of RP for producers