Research On The Agricultural Weather Risk Shifting Mechanism

Agriculture has always been the foundation of the economic and politicaldevelopment in our country, and the farmers have a decisive advantage in totalpopulation of China, therefore the strengthening of comprehensive nationalstrength of China is closely related to the development of agriculture. However,our country is full of many kinds of climates, and there are many meteorologicaldisasters every year, which lead to huge loss in agriculture, and seriously affectthe agriculture development and the improvement of farmers’ income, so how toeffectively deal with the resulting loss of meteorological disasters is a key toimprove the level of agricultural development.Firstly, this paper expounds the current situation of the agricultural weatherrisk,and make analysis about the problems in shifting the agricultural weatherrisk of the traditional commercial agriculture insurance, the policy-basedagriculture insurance and new technology,then make a comparison on shifting theagricultural weather risk between traditional methods and weatherderivatives.Secondly, based on the relevant analysis of all kinds of theory athome and abroad,the paper designs a agricultural weather risk shiftingmechanism including a series of weather derivatives,such as temperature indexfutures contract, rainfall index options, exchange contracts and hedge options.Once again,this paper makes a check about the applicability of this agriculturalweather risk shifting mechanism.The applicability firstly selects corn yield andrelevant meteorological data in Harbin as the research objects, then uses therelevant model to make simulation of temperature and rainfall,once again,usesMonte carlo to fix a price of weather derivatives,at last,studys the role oftemperature index futures contract and rainfall index options on shifting themeteorological disasters caused by temperature and rainfall. The empirical research shows that weather derivatives play an importantrole on shifting agricultural weather risk, they can not only realize the need ofhedging, but also realize profits target in certain conditions.At the same time, theempirical research also shows that the main participation of weather derivativesmarket is extensive, which can expand the scope of shifting the agriculturalweather risk,and lock the income of the agricultural producers in the givenlevel.At last,based on the shortcomings of this agricultural weather risk shiftingmechanism,this paper puts forward the corresponding perfect measures: guidingpeasants to participate the weather derivatives market, perfecting the internalstructure of weather derivatives market, perfecting the weather derivativescontracts, perfecting the legal environment of the weather derivatives market.