ABSTRACT
Risk is the uncertainty that affects an individual’s welfare and it is often associated with adversity and loss. There are numerous sources of risk in agriculture ranging from price and yield risks to the personal risks connected with injury or poor health. These could have repercussions that affect resources like irrigation, credit, etc., and other types of events linked to a person’s welfare. In developing countries, agriculture is prone to risks and governments have played an active role in helping farmers mitigate risks. In some countries, farmers are hedged against price risk through price support mechanisms, while in others, national funds have been created to take care of nature-afflicted risks. Farmers have their own ways of mitigating risk. This article is an attempt to look at the sources of risk in agriculture and the use of weather derivatives in mitigating agricultural risks.
