Crop Insurance Decision-Maker 2025 is a free web-based decision tool provides expected revenues net of costs under various risk management strategies. The user may compare if crop insurance is "worth it" by seeing which risk management strategy results in the highest expected net revenue. Scenarios are provided for Yield Protection (YP), Revenue Protection (RP), and Revenue Protection - Harvest Price Exclusion (RP-HPE) across all eight available coverage levels (50%, 55%, 60%, 65%, 70%, 75%, 80%, and 85%). The user can compare the expected net revenues across all these scenarios to one scenario in which no insurance is purchased. In most instances, the best (or optimal) strategy is to buy at least some level of crop insurance. More specifically, the best coverage level tends to be in the 75% to 85% range.



You will notice that there is a set of "Risk Neutral" and a set of "Risk Averse" results (see Figure 1). The "Risk Neutral" results do not account for a user's risk preferences which means the user is not at all concerned about drought, excess rainfall, pest pressure, or any other risk which may drive down yields and/or prices. They are only concerned about maximizing profit with no concern about risk. The "Risk Averse" results account for risk preferences and will always be below the "Risk Neutral" results. That is because we model someone who is willing to accept a dollar amount less than the expected amount with certainty rather than take on the risk and not be guaranteed a level of revenue net of cost. We essentially model the "peace of mind" that is purchased with crop insurance.

Figure 1. Example of Crop Insurance Decision-Maker Interface Using Craighead County, Arkansas

Since most farmers tend to be risk averse, I generally suggest following the "Risk Averse" results. I note that the optimal level under both scenarios tends to be the same but the level of net revenue is different since the "Risk Averse" user is willing to accept a lower dollar amount with certainty. The lower dollar amount reflects the expected net revenue that includes an insurance premium. The "Risk Neutral" results do not have an insurance premium in the cost of production.

For more details on the crop insurance products, themselves, I would recommend two resources we have developed:

1. The Fundamentals of Federal Crop Insurance Workbook: https://www.uaex.uada.edu/publications/pdf/MP576.pdf.
2. The Fundamentals of Federal Crop Insurance Short Course: https://learn.uada.edu/course/view.php?id=2701.

The first resource is a workbook which provides a 30,000-foot view of the program as a whole and includes chapters on the products I model in the decision tool. The second resource is an online short course developed with UADA-Learn (https://learn.uada.edu/), our online learning platform. You may login to UADA-Learn with your UADA email credentials if you have not already enrolled in courses there before. If you have trouble with the link to the course, you can search "crop insurance" within the UADA-Learn platform, and it will bring up the course as a search result.

*SOURCE: Peanut Prices, Runner-type, USDA, National Agricultural Statistics Service, February 6,2025.

NOTE: Each state average price is taken across multiple input suppliers across Arkansas. For a price more local to you, please contact Mr. Riley Smith at rsmith@uada.edu.

Mississippi River Level at Memphis, TN

(as of February 6, 2025)

SOURCE: NOAA National Water Prediction Service

NOAA 7-Day Weather Forecast

(as of 2/6/2025)

SOURCE: NOAA National Weather Service Weather Prediction Center