Crop Insurance as a Risk Management Strategy in Bangladesh

Figure 7.2 explains the methodology
to identify a region belonging to a
station. Here it is assumed that the
area belongs to a station having
homogeneous climatic characteristics.
If there are significant differences in
hydro-climatic characteristics along
different parts of the covering area of
a station, the applicability of weather
index for insurance will be erroneous.
Again, the adequacy and quality of
data depend on the type of index
proposed for the weather insurance
contract. A few examples of weather
indexes for specific agricultural
exposures and their applicability in
Bangladesh are explained below.
Weather Index: Daily average Temperature
Critical temperatures causing crop damage may vary depending on the length of time that
temperatures deviate from expected level as well as on the variety, health, and development
stage of a plant. Likewise, for a particular crop the critical temperature required for different
growing period can be fixed and deviation from it can be correlated to yield loss. The
required temperature at different months can be used as Weather Index for that crop.
Temperature data can be collected from the nearby weather stations. Crop damage can also
be the result of specific or critical temperature events that can be detrimental to yield or
quality. Freezing conditions, for instance, were reported to have caused more than US$600
million in damage to the U.S. citrus crop in a single week of December 1998. In 2005, in
Bangladesh, due to a prolonged cold spell along Brahman Baria district a large area of Boro
rice fields were affected, where there was no rice inside the husk of rice. During the
flowering and maturation time of rice the temperature was not at required level so that no rice
could be formed there. During field survey at Sunamgonj almost same incidents were heard
and according to the farmers such incidents are occurring more frequently nowadays.
Weather Index: Deficit Rainfall and Drought
Figure 7.2: Methodology to fix station coverage.
Meteorological drought is usually defined in terms of deviation of precipitation from normal
levels and duration of a region’s dry periods. Agricultural drought refers to situations in
which soil moisture content no longer meets crop growing needs in an area due to insufficient
rainfall. Crops, particularly rain-fed crops, often have a minimum overall threshold of
cumulative rainfall necessary for successful and healthy plant development. These water
requirements must be met by natural rainfall, stored soil moisture from precipitation prior to
the growing season, or supplemental irrigation. Therefore, a deficit of rainfall below these
levels, in the absence of irrigation, can cause plant moisture stress that affects development
and reduces yields.
A simple cumulative rainfall index can be developed to suit a grower’s specific insurance
requirements with regard to such decreases in rainfall and yield. Looking at historical yield
112