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Geographical Influences on Farming and Risk
This section provides summary information on MPCI and farming in general as an introduction to current ratemaking issues.
Chart 6 shows the distribution of MPCI premium by major crop groupings over the period from 1980 through 1998. For example, cotton premium has increased in share in recent years. This may be due to high crop prices resulting in higher production, both of which result in higher insured values and greater premiums. In contrast, the premium market share for soybeans has decreased in recent years. Chart 7 shows the Herfindahl index, defined as the sum of the squares of the market shares for each crop grouping, which demonstrates that the shifts between crops being grown has not led to an increase in concentration. On an individual state basis, the corresponding market share and Herfindahl index exhibits (not included) would show a persistence of the preferred crops over time. This is primarily due to the limitations that climate places on certain crops. Another reason is governmental disincentives, recently eliminated, which discouraged producers from planting different crops.
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