DOI: 10.1002/aepp.70130 ISSN: 2040-5790
Effectiveness of the Pasture, Rangeland, and Forage Rainfall Index (
PRF
‐
RI
) Program: Interval Selections With Uniform Premium Subsidy Rates
Whoi Cho, Matthew Diersen ABSTRACT
This study examines interval selection in the Pasture, Rangeland, and Forage Rainfall Index (PRF‐RI) program and evaluates how uniform premium subsidy rates affect optimal interval selections. Using South Dakota as a case study, we show a trend of increasing selection of nonproduction intervals from 2013 to 2024, raising concerns about program effectiveness. A mean–variance portfolio framework is used to identify optimal selection under profit‐maximizing and risk‐averse preferences, with and without subsidies. The results suggest that uniform premium subsidy rates can distort incentives and push producers toward selecting nonproduction periods, as taking more subsidies leads to higher expected net payouts.