Comparative Analysis of Producer Welfare Benefits of Yield Substitution and Yield Exclusion
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Farm Bill 2014 introduced yield exclusion option to exclude the catastrophic year yield from APH yield
to mitigate its impact on lowering the insurance guarantee. With high prevalence of yield substitution for
the low yield; yield exclusion offers another option for producers to choose to enhance their welfare. We
take the case of two crops and counties with different risk profile and conducted a comparative analysis
on welfare gain by these two options for yield and revenue protection insurance. Our analysis suggests
that the yield exclusion provides the higher welfare gain to the producer and likely to replace yield
substitution. However, yield substitution is still a valid option when yield exclusion does not change the
effective coverage level enormously.