Date of Graduation

8-2025

Document Type

Thesis

Degree Name

Master of Science in Agricultural Economics (MS)

Degree Level

Graduate

Department

Agricultural Economics and Agribusiness

Advisor/Mentor

Connor, Lawson

Committee Member

Biram, Hunter

Second Committee Member

Popp, Michael

Keywords

Crop Insurance; Index-Based Insurance; Interval Selection; Loss Ratio; PRF Insurance; Rainfall Index

Abstract

Despite being available nationwide since 2016, enrollment in Pasture, Rangeland, and Forage (PRF) insurance remains low in many regions of the country. The program's performance also presents regional discrepancies, with loss ratios varying significantly. Studies that have simplified the complexity of interval selection for producers have been shown to positively affect PRF enrollment. Such studies remain limited in several forage-producing areas. This study aims to address the lack of information in Arkansas specifically. Arkansas has among the nation's lowest participation rates and loss ratios. Low loss ratios signal that participants pay more in premiums than received in indemnities and may also drive low enrollment. To determine the cause of these low loss ratios, we first examined how different interval selection strategies, such as consistent enrollment, would affect the program's profitability. These strategies focused on limiting basis risk, historical variation, the impact of rainfall on forage, and simulating rainfall rating discrepancies. Under consistent enrollment and intuitive selection strategies, PRF was found to be profitable at different precipitation levels over time. We also conducted a regression analysis to determine if changes in short-term Rainfall Index trends and variation trends affected loss ratios. Additionally, we examined whether trend adjustments were included in the rating system. Knowledge of changes in both historical variation and Rainfall Index trends was found to be very crucial in raising the low loss ratios in the region. This study, therefore, highlights the complexity of interval selection and offers producers a starting point for making informed decisions about the use of PRF in Arkansas.

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