Is Organic Farming Risky? An Evaluation of WFRP in Organic and Conventional Production Systems

Abstract

Farm-level data from the Farm Financial Management Database (FINBIN) are used to evaluate the effectiveness of Whole Farm Revenue Protection (WFRP) insurance in diverse farming operations. A panel of diverse Minnesota farms is used to establish actual production history and compute hypothetical performance over three years. This study characterizes the relative riskiness between organic and conventional farms and their comparative insurance performances by avoiding potential adverse selection issues in other studies. Empirical evidence is provided to dispute past empirical findings suggesting that organic farms are riskier than conventional farms, as measured by lower loss ratios.