Economists look at risk-management alternatives

Three AgCenter economists are examining ways Louisiana farmers can manage risk and improve their profitability.

Nauveen Adusumilli is taking an in-depth view of Natural Resources Conservation Service cost-sharing programs for conservation tillage and cover crops.

Once farmers determine their eligibility, they need to consider the best way to take advantage of cost-sharing programs, he said. A cover crop calculator can be used to measure the costs to plant, manage and terminate cover crops.

“Cost minus cost-sharing equals net cost,” Adusumilli said.

Enrollment in a cost-sharing program must involve new practices that show meaningful and measurable improvements. For farmers to find out how they can use the program, Adusumilli has developed an Excel spreadsheet tool for corn and soybeans that’s available on the web at

“It looks at the individual farming situation to develop meaningful and measurable improvement,” he said. “For example, changing from planting a single cover crop species to multiple species can be eligible for cost sharing.”

Cover crops require a five-year commitment, and conservation tillage requires a three-year commitment, Adusumilli said. Costs are calculated per acre. Most farmers spend $25 to $70 per acre on conservation practices, and the NRCS cost share ranges from $48 to $58 per acre. The online tool can help farmers make decisions on how to gain the most value from cost-share programs on their farms.

“The funds are intended for the farmer,” Adusumilli said.

Mike Deliberto has developed enterprise budgets, net return comparison models and crop insurance tutorials farmers can use to navigate the decision-making process of selecting levels of crop insurance to procure.

“Crop insurance is a risk-management tool,” Deliberto said. “We want to help farmers make better informed decisions to manage costs and inputs.”

A major component of Deliberto’s risk management program is developing spreadsheet-based decision tools that farmers can use to estimate their costs using U.S. Department of Agriculture national price and yield data. The agricultural risk coverage (ARC) program pays when revenue falls below an area-wide five-year average. Price loss coverage (PLC) is a price support program. Both programs have accompanying software.

The payment projector in Deliberto’s program allows farmers to evaluate crop insurance costs and program payments by including cost changes in rent, fuel and other variables.

“We want to give farmers tools they can use during the year,” Deliberto said. “As variables change during the season, they can make changes based on prices and yield expectations.”

The tutorial provides examples of coverage levels and how farm policy works so farmers can consider and evaluate their willingness and ability to bear risk, he said.

Along those same lines, economist Lawson Connor is developing a crop insurance rating system to help farmers evaluate the relative risk of varying levels of insurance.

Farmers are concerned with high premium rates while the federal government is offering less reliance on “ad hoc” crop loss payments, he said.

Louisiana farmers have increased their yields, and risks go down as yields go up with new production methods, including pest management and irrigation. Because the system is based on actual production history and past performance over a long time, Connor is looking at a computer simulation based on more recent results rather than a 30-year history.

“We want to improve farmers’ experiences with crop insurance and show them how to improve the efficient use of crop insurance,” he said. “Insurance is a risk management tool rather than a cost.”

Richard Bogren

11/6/2019 11:42:31 PM
Rate This Article:

Have a question or comment about the information on this page?

Innovate . Educate . Improve Lives

The LSU AgCenter and the LSU College of Agriculture