Analysis on the Income Risk and Income Insurance Ricing of Planting Farmers in North China

Abstract

The frequent occurrence of extreme weather disasters under global climate change has greatly impacted agricultural production, caused crop yield and price fluctuations, affected the increase of farmers' income, and hindered the development of the rural economy. As a typical mountainous region in North China, Shandong Province is a major peanut-planting province. In recent years, the peanut planting area in Shandong Province has remained relatively stable at around 10 million hectares (approximately 6.67 million hectares), accounting for approximately 14% of the national peanut planting area. Affected by meteorological disaster risks and consequent price risks, peanut farmers in Shandong Province are faced with double threats of output and price. This study is aiming to analyze the income risks faced by peanut planting farmers in the northern regions of China and to develop a comprehensive understanding of the factors influencing their income variability. The study may investigate various aspects especially the market price fluctuations, socioeconomic factors affecting peanut farming and the correlation of the peanut pricing and the local insurance. The current policy-based peanut insurance makes it difficult to fully disperse risks and guarantee stable production with the permission of relevant government department. Therefore, based on the peanut yield and price data of Shandong Province from 1991 to 2017 and following the logical context of "meteorological disaster - yield risk - price risk - income loss - income insurance", this paper uses the Copula method to calculate the premium rate of peanut income insurance and finds that under the guaranteed level of 70%-90%, the pure premium rate is between 1.5%-4.15%. Compared with the current cost insurance with a flat rate of 4% in Shandong Province, the income insurance rate is generally lower than the current rate. Secondly, there are regional differences in income insurance rates. In addition, at a higher level of protection, the income insurance rate is higher.