This case study describes the potential use of new risk-sharing instruments (Skees, Skees and Barnett) by three closed sugar-beet-pro- cessing cooperatives in Minnesota and North Dakota. These instruments are discussed in the context of members'crop yield risk. Zeuli, in a companion paper, develops the back- ground for applying new risk-sharing instru- ments to mitigating the business-risk of co- operatives. The first two sections of this article describe the beet sugar cooperatives, the risks faced by the cooperatives and their members, and cur- rently available risk-management tools. The following two sections present members' stat- ed risk-management objectives and various alternatives that are under consideration as means for achieving those objectives. An im- portant point raised here is that although members are not pleased with some features of currently available federal crop insurance products, they are unwilling to forego the pre- mium subsidies contained in those federal products. The remainder of the article con- siders an important implementation issue re- lated to one of the alternatives being consid- ered by the cooperatives. Segmenting of yield risk into systemic (spatially correlated) and independent components-a concept dis- cussed in the Skees and Zeuli companion pa- pers-is demonstrated. This example draws on information from focus groups with co- operative members and processing plant man- agers, yield data maintained by the cooperatives, and analyses of selected issues raised by the focus groups (Black, Black and Hu).

Source: American Journal of Agricultural Economics, Vol. 81, No. 5, Proceedings Issue (Dec.,1999), pp. 1240-1246

Published by: Blackwell Publishing on behalf of the Agricultural & Applied Economics Association