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Document Type

Thesis - University Access Only

Award Date


Degree Name

Master of Science (MS)



First Advisor

Matthew Diersen


The objective of this research is to incorporate the correlation between hay yield and Pasture, Rangeland, and Forage Rainfall Insurance (PRF-RI) Index to find the optimal weights of months for a producer to insure. Historical rainfall index and hay yield data will be used to calculate returns and create an efficient frontier using Markowitz portfolio theory. Portfolios will be compared to find those that provide indemnity payments when forage needs are high. The research is conducted for five different counties in South Dakota. The May-June and July-August intervals are important months for forage production insurance in five counties of South Dakota. Sensitivity analysis by changing coverage levels, the productivity factor and the subsidy level showed similar weights confirming the robustness of the model. With the premium subsidy, a producer enrolling in PRF-RI would earn higher returns per acre and the risk would be reduced in some counties. Without any premium subsidy, the mean returns from the optimal portfolios are lower. In addition, a small change in the mean return with and without insurance shows the actuarial fairness of PRF-RI.

Library of Congress Subject Headings

Crop insurance -- South Dakota.
Farm risks -- South Dakota


Includes bibliographical references (pages 59-60).



Number of Pages



South Dakota State University


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