Farm Size—Acres and Expansion Intentions
Insurance users are expected to operate larger
acreages, and to have intentions for further
acreage expansions. They may also have a
greater number of landlords and farm locations,
or anticipate higher future leverage and
a commensurate need to reduce business risk.
In general, larger sizes reflect greater managerial
capacities and perhaps economies of
size in the utilization of various risk management
practices. Similar rationale may apply to
a preference for revenue insurance over yield
insurance and hail insurance as size increases.
Furthermore, for APH insurance to make a
payment, average yield across all insured acres
must fall below the yield election level. As it
would be more difficult on larger and more naturally
geographically dispersed areas to suffer
an aggregate yield reduction of a given magnitude,
APH would likely becomes less attractive
relative to revenue insurance as farm size
increases.