Geographical Influences on Farming and Risk - Cont.

The insured liabilities for 1998 in millions of dollars for the four major crops are shown in Charts 8 to 11. Average yields per acre for these crops are shown in Charts 12 to 15. The maps indicate where each crop is grown and how productive it is. For example, the availability of water for irrigation in California and Arizona has resulted in very high cotton yields. Texas cotton producers do not have access to inexpensive water, resulting in much lower yields. Despite this, the bulk of the nation's cotton crop is grown in Texas. The primary reason that cotton is grown in Texas is that this is the most productive use for the land.

The concentration of exposures in limited geographical areas, as for Texas cotton, is one reason for the non-independence of the loss experience. Not only weather conditions, but soil types, elevation, and rainfall can be expected to be similar for exposures situated in close proximity to one another. The question of how much influence geography plays on the expected losses is an important issue. This will be discussed with regard to the recent increase in participation in the MPCI program.