1. Since the research reported here was done, the Risk Management Agency (RMA) has announced approval of a Trend-Adjusted APH Yield Endorsement for corn and soybeans in most counties of the Midwest. This Endorsement adjusts for trends at the county level, as in our analysis. Therefore, the analysis reported here is timely in that it coincides with an effort by the RMA to address product shortcomings relating to yield trends. This emphasizes the importance of the issue examined in this paper. However, our analysis should not be interpreted as an evaluation of the newly introduced product because the procedures followed presumably do not perfectly mirror those used in developing the Endorsement.
2. Umarov A. 2009. “Three Essays on Crop Insurance: RMA's Rules and Participation, and Perceptions.” Ph.D. thesis, University of Illinois at Urbana-Champaign.
3. Nonparametric Estimation of Crop Insurance Rates Revisited
4. Yield substitution enters into APH yields in any year when the actual yield falls below 60 percent of county proxy T-yield. In such cases the farmer can replace the individual year's yield by 60 percent of T-yield. A yield floor is used if the computed APH yield falls below a given percentage of the county T-yield. We do not incorporate yield substitution and yield floors into the analysis reported in this paper. Thus, our results are an abstraction from reality to the extent that yield substitution and yield floors influence the effect of yield trend.