Discussion
Revenue policies pay you when your gross income (i.e., price times yield) declines below your coverage level (in this example, either 65% or 75% or 85% of gross income). It doesn’t matter if the decline in gross income is due to declining yield, price, or both. However, if you don’t have much of a yield decline, then it takes a large decline in price to trigger an RP payment, given the likely 80 cent base price level. Hence, if your yields are normal, an RP policy won’t provide any better pure price protection than the 52 cent loan rate.
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Howdy!
Welcome to the educational website of Dr. John Robinson in the Department of Agricultural Economics at Texas A&M University.
The website focuses on farm-level implementation of strategies for Texas cotton growers to deal with yield and price risk. Contact me to receive a weekly e-mail notice of when the latest edition is posted on-line. In addition, we provide daily crop market news and commentary on Twitter (@aggie_prof) and also on the Master Marketer facebook page. We welcome your feedback and interaction in these social media.
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