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their financial obligations. However, the development of crop insurance bas significantly reduced the financial problems of the farmers. In fact, it has enlarged the possibilitios of grant- ing farm credit under conditions which are mutually satisfnc- tory to lender and borrower.

their financial obligations. However, the development of crop insurance bas significantly reduced the financial problems of the farmers. In fact, it has enlarged the possibilitios of grant- ing farm credit under conditions which are mutually satisfnc- tory to lender and borrower.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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AGRICULTURAL ECONOMICS their financial obligations. Howevcr, the development of crop insurance has significantly reduced the financial problems of the farmers. In fact, it has enlarged the possibilitics of grant- ing farm credit under conditions which are mutually satisfac- tory to lender and borrower
Transcribed Image Text:AGRICULTURAL ECONOMICS their financial obligations. Howevcr, the development of crop insurance has significantly reduced the financial problems of the farmers. In fact, it has enlarged the possibilitics of grant- ing farm credit under conditions which are mutually satisfac- tory to lender and borrower
AGRICULTURAL INSURANCE 95 Crop Insurance in the U.S. In the United Statea, crop insurance is very new coraparod to other weil-established types of insurance. The Federal Crop Insurance Corporation was created in 1938. Originally, wheat was the only crop included in the program. Later en how- ever, cotton, tobacco, and corn were also covered by the crop insurance. There are two kinds of insurance offered by the crop in- suranca corporation. One is against the loss of investment which is not to excoed 75 percent of the investment in the crop. The other is against loss of yield of the farm. Premium rates are computed on the normal loss expectancy of the community as shown by historical records. A farmer may choose various ainounts of coverage up to 75 percent. Premiums are deter- mined by the size of the coverage. When the program started, the Federal Crop Inaurance Corporation was confronted with the problem of cbtaining reli- able data on harvests and losses in the communities selected, unlike other types of insurance such as life insurance in which there are accurate statistics which have been acquired over the years. Proper premiums cán be based on such established statistics. In the case of crop insurance, accurate premiums can only be computed based on experience. As time went by, better premiums have been adopted. It was expeeted never- theless that such program will be developed to provide the farm- ers with more stable farm incomes. It has been observed that during bad weather conditions losses are greater than the premiums collected. On the other hand, losses are lesser than premiums during good weather. For judging the success or failure of the crop insurance pro- gram, a single crop or a single year's experience is not a suffi- cient criterion. Although the crop insurance program of the federal gov- ernment started only in 1938, many farmers have considered it necessary for their farm protection. The crop insurance, to- gether with the successful operation of the furmers' mutual fire and windstorm insurance has greatly reduced the heavy risks from natural hazards which individual farmers suffer. Agricul- ture has suffered tremendousiy from the furies of nature. As a result, more often than not, farmers find it difficult to meet
Transcribed Image Text:AGRICULTURAL INSURANCE 95 Crop Insurance in the U.S. In the United Statea, crop insurance is very new coraparod to other weil-established types of insurance. The Federal Crop Insurance Corporation was created in 1938. Originally, wheat was the only crop included in the program. Later en how- ever, cotton, tobacco, and corn were also covered by the crop insurance. There are two kinds of insurance offered by the crop in- suranca corporation. One is against the loss of investment which is not to excoed 75 percent of the investment in the crop. The other is against loss of yield of the farm. Premium rates are computed on the normal loss expectancy of the community as shown by historical records. A farmer may choose various ainounts of coverage up to 75 percent. Premiums are deter- mined by the size of the coverage. When the program started, the Federal Crop Inaurance Corporation was confronted with the problem of cbtaining reli- able data on harvests and losses in the communities selected, unlike other types of insurance such as life insurance in which there are accurate statistics which have been acquired over the years. Proper premiums cán be based on such established statistics. In the case of crop insurance, accurate premiums can only be computed based on experience. As time went by, better premiums have been adopted. It was expeeted never- theless that such program will be developed to provide the farm- ers with more stable farm incomes. It has been observed that during bad weather conditions losses are greater than the premiums collected. On the other hand, losses are lesser than premiums during good weather. For judging the success or failure of the crop insurance pro- gram, a single crop or a single year's experience is not a suffi- cient criterion. Although the crop insurance program of the federal gov- ernment started only in 1938, many farmers have considered it necessary for their farm protection. The crop insurance, to- gether with the successful operation of the furmers' mutual fire and windstorm insurance has greatly reduced the heavy risks from natural hazards which individual farmers suffer. Agricul- ture has suffered tremendousiy from the furies of nature. As a result, more often than not, farmers find it difficult to meet
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