Drought insurance in wheat and corn production with weather derivatives: the case of Serbia
Abstract
In the past, farmers have bought traditional insurance to protect them-selves against crop losses caused by weather. As a new tool, weather derivatives have the potential to support farmers against weather induced risks more efficiently than traditional insurance. Nevertheless the market for weather derivatives is still relatively limited. The objective of this analysis is to quantify the risk reducing effect that can be achieved by using weather derivatives in crop production. For this reason a crop farm in Serbia served as an example to determine the risk reducing effect in wheat and corn production, as they are the most important crops in Serbia with grate export potential. The paper applies stochastic simulation and value-at-risk methods. In the paper are presented fair premiums and payoffs of put options in wheat and corn production, as well as revenue distributions with and without weather derivatives. It was found that the risk reduction was more significant in wheat production ...(21.88%) than in corn production (18.13%). Therefore, in case of Serbia weather derivatives would be more useful in wheat production.
Keywords:
Crop production / Hedging effectiveness / RevenueSource:
Custos e Agronegocio, 2015, 11, 4, 189-202Publisher:
- Universidade Federal Rural de Pernambuco
Funding / projects:
- Sustainable agriculture and rural development in the function of accomplishing strategic objectives of the Republic of Serbia in the Danube region (RS-46006)
- The Improvement and Preservation of Biotechnology Procedures for Rational Energy Use and Improvement of Agricultural Production Quality (RS-31051)
Collections
Institution/Community
Poljoprivredni fakultetTY - JOUR AU - Marković, Todor AU - Husemann, Christoph AU - Ivanović, Sanjin AU - Zekić, Vladislav PY - 2015 UR - http://aspace.agrif.bg.ac.rs/handle/123456789/3846 AB - In the past, farmers have bought traditional insurance to protect them-selves against crop losses caused by weather. As a new tool, weather derivatives have the potential to support farmers against weather induced risks more efficiently than traditional insurance. Nevertheless the market for weather derivatives is still relatively limited. The objective of this analysis is to quantify the risk reducing effect that can be achieved by using weather derivatives in crop production. For this reason a crop farm in Serbia served as an example to determine the risk reducing effect in wheat and corn production, as they are the most important crops in Serbia with grate export potential. The paper applies stochastic simulation and value-at-risk methods. In the paper are presented fair premiums and payoffs of put options in wheat and corn production, as well as revenue distributions with and without weather derivatives. It was found that the risk reduction was more significant in wheat production (21.88%) than in corn production (18.13%). Therefore, in case of Serbia weather derivatives would be more useful in wheat production. PB - Universidade Federal Rural de Pernambuco T2 - Custos e Agronegocio T1 - Drought insurance in wheat and corn production with weather derivatives: the case of Serbia EP - 202 IS - 4 SP - 189 VL - 11 UR - https://hdl.handle.net/21.15107/rcub_agrospace_3846 ER -
@article{ author = "Marković, Todor and Husemann, Christoph and Ivanović, Sanjin and Zekić, Vladislav", year = "2015", abstract = "In the past, farmers have bought traditional insurance to protect them-selves against crop losses caused by weather. As a new tool, weather derivatives have the potential to support farmers against weather induced risks more efficiently than traditional insurance. Nevertheless the market for weather derivatives is still relatively limited. The objective of this analysis is to quantify the risk reducing effect that can be achieved by using weather derivatives in crop production. For this reason a crop farm in Serbia served as an example to determine the risk reducing effect in wheat and corn production, as they are the most important crops in Serbia with grate export potential. The paper applies stochastic simulation and value-at-risk methods. In the paper are presented fair premiums and payoffs of put options in wheat and corn production, as well as revenue distributions with and without weather derivatives. It was found that the risk reduction was more significant in wheat production (21.88%) than in corn production (18.13%). Therefore, in case of Serbia weather derivatives would be more useful in wheat production.", publisher = "Universidade Federal Rural de Pernambuco", journal = "Custos e Agronegocio", title = "Drought insurance in wheat and corn production with weather derivatives: the case of Serbia", pages = "202-189", number = "4", volume = "11", url = "https://hdl.handle.net/21.15107/rcub_agrospace_3846" }
Marković, T., Husemann, C., Ivanović, S.,& Zekić, V.. (2015). Drought insurance in wheat and corn production with weather derivatives: the case of Serbia. in Custos e Agronegocio Universidade Federal Rural de Pernambuco., 11(4), 189-202. https://hdl.handle.net/21.15107/rcub_agrospace_3846
Marković T, Husemann C, Ivanović S, Zekić V. Drought insurance in wheat and corn production with weather derivatives: the case of Serbia. in Custos e Agronegocio. 2015;11(4):189-202. https://hdl.handle.net/21.15107/rcub_agrospace_3846 .
Marković, Todor, Husemann, Christoph, Ivanović, Sanjin, Zekić, Vladislav, "Drought insurance in wheat and corn production with weather derivatives: the case of Serbia" in Custos e Agronegocio, 11, no. 4 (2015):189-202, https://hdl.handle.net/21.15107/rcub_agrospace_3846 .