> The point is that you, the farmer, don't need to take a view on whether the next year will be drier than normal. You just buy $X worth of rainfall futures. S

> The point is that you, the farmer, don't need to take a view on whether the next year will be drier than normal. You just buy $X worth of rainfall futures. Sure, but if I, a non-farmer market player that couldn't give two fucks what the market is even about, can predict that the next year will be dryer than normal, and to what degree, better than anyone, I can make money buying up however many of these futures I can afford. It works even better if I can actually make the weather more dry somehow. This, I believe, is called "providing liquidity to the market", but curiously, if I tried that with flood insurance, I'd just be guilty of insurance fraud.