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Hedging Rainfall Risk by Farmers Growing Soyabean in Jhalawar District

Author

Listed:
  • Rajiv Seth

    (Rajiv Seth is the Registrar, TERI University, New Delhi, India, and a Ph.D. candidate at the Aligarh Muslim University, Aligarh, Uttar Pradesh, India; e-mail: rseth@teri.res.in)

  • Valeed A. Ansari

    (Valeed A. Ansari is Reader, Department of Business Administration, Aligarh Muslim University, Aligarh, Uttar Pradesh, India; e-mail: valeedin@yahoo.com)

  • Manipadma Datta

    (Manipadma Datta is Professor, Institute of Management Technology, Ghaziabad, Uttar Pradesh, India; e-mail: mdatta@imt.edu)

Abstract

Rainfall risk to the yield of a crop can be hedged, to an extent, by the use of weather derivatives. The paper considers a theoretical model which maximises the expected utility of a farmer growing a crop, with respect to planned production. An option to hedge the weather risk to yield, through purchase of weather derivatives, is introduced. The case of farmers growing soyabean in Jhalawar district of Rajasthan in central India is taken as an example in order to determine the theoretical willingness to pay to hedge volumetric risk to yield.

Suggested Citation

  • Rajiv Seth & Valeed A. Ansari & Manipadma Datta, 2008. "Hedging Rainfall Risk by Farmers Growing Soyabean in Jhalawar District," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 2(2), pages 199-212, June.
    • Handle: RePEc:sae:mareco:v:2:y:2008:i:2:p:199-212
    DOI: 10.1177/097380100800200203
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    References listed on IDEAS

    as
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    2. Alicia N. Rambaldi & Phil Simmons, 2000. "Response to price and production risk: The case of Australian wheat," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 20(4), pages 345-359, April.
    3. John M. Antle, 1987. "Econometric Estimation of Producers' Risk Attitudes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 509-522.
    4. Simmons, Phil & Rambaldi, Alicia N., 1997. "Potential demand for hedging by Australian wheat producers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(2), pages 1-12.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Crop Yield Risk; Weather Derivatives; Willingness to Pay; JEL Classification: Q14;
    All these keywords.

    JEL classification:

    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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