The Effect of Increased Producer Participation - Cont.

A similar analysis can be performed for the countrywide loss costs for corn from 1980 through 1997, as shown in Chart 20. The test of the residuals in Chart 21 leads to a conclusion similar to that for yields, that there is no significant decrease in insurance risk over this period. Again, the slope of the fitted line is not statistically significant from zero at the 95% confidence level.

This issue can be considered from another perspective. The discussion of spatial and intertemporal correlation, presented below, provides a means for evaluating how strongly the experience in one county is correlated to the experience in adjacent counties. This would imply that external factors which operate over large geographic areas are the source of much of the risk in farming. Consequently, an increase in producer participation in a given county may not have a significant effect on the overall riskiness of the MPCI program. The location of the farm rather than the skill of the individual producer may be the primary determinant of the risk. If this conclusion is true, it would imply that the improved MPCI experience in recent years may due to good weather conditions rather than increased producer participation.