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"I don't think weather forecasting is currently good enough for a farmer to plan which crops to plant based on rainfall predictions." It's good enough to offer

by roel_v 14y ago

"I don't think weather forecasting is currently good enough for a farmer to plan which crops to plant based on rainfall predictions." It's good enough to offer insurance to farmers for when harvests will fail. This exists, I know because I (even if only at arms length) work in this field.

pcrh 14y ago
Agriculture is boom-and-bust, precisely due to the unpredictability of the weather, infestations, etc. It's more predictable today than in the past, but there is still a lot of guesswork going on. There are sophisticated mechanisms in place for mitigating this, such as the futures market and insurance. I'd wager that the "compensation" the hay farmer mentioned above is part of an insurance-type scheme. Maybe like this: http://www.washingtonpost.com/national/health-science/drought-puts-federal-crop-insurance-under-scrutiny/2012/08/13/3d9e2960-e0c7-11e1-a19c-fcfa365396c8_story.html http://www.washingtonpost.com/national/health-science/drough...
wooster 14y ago
The insurance plans I've seen were based upon historical data, and didn't take weather forecasts into account. (My family is in farming and ranching.)
- roel_v 14y ago
  I'm not sure how these insurances are sold to end users at small scales. I'm involved in building crop harvest forecast systems to be used by insurers who insure large businesses (think multinationals) who need resources from mostly Asian and African countries for the production of their goods, e.g. palm trees. So this use case is different in scale from your example, our work is mostly in risk modeling on a large scale. That said, if I were selling insurances, I'd want two things: data to justify or explain my rates to my customers, and data to make predictions of my own risk and/or profit margins. The two might be correlated in a highly competitive and transparent market, but I have a hunch that these insurances are not, and that there isn't a whole lot of pressure to work on a cost plus pricing model, so that these insurers can work on a value-added pricing model.

by roel_v 14y ago

pcrh 14y ago

Agriculture is boom-and-bust, precisely due to the unpredictability of the weather, infestations, etc. It's more predictable today than in the past, but there is still a lot of guesswork going on. There are sophisticated mechanisms in place for mitigating this, such as the futures market and insurance. I'd wager that the "compensation" the hay farmer mentioned above is part of an insurance-type scheme. Maybe like this: http://www.washingtonpost.com/national/health-science/drought-puts-federal-crop-insurance-under-scrutiny/2012/08/13/3d9e2960-e0c7-11e1-a19c-fcfa365396c8_story.html http://www.washingtonpost.com/national/health-science/drough...

wooster 14y ago

The insurance plans I've seen were based upon historical data, and didn't take weather forecasts into account. (My family is in farming and ranching.)

roel_v 14y ago
I'm not sure how these insurances are sold to end users at small scales. I'm involved in building crop harvest forecast systems to be used by insurers who insure large businesses (think multinationals) who need resources from mostly Asian and African countries for the production of their goods, e.g. palm trees. So this use case is different in scale from your example, our work is mostly in risk modeling on a large scale. That said, if I were selling insurances, I'd want two things: data to justify or explain my rates to my customers, and data to make predictions of my own risk and/or profit margins. The two might be correlated in a highly competitive and transparent market, but I have a hunch that these insurances are not, and that there isn't a whole lot of pressure to work on a cost plus pricing model, so that these insurers can work on a value-added pricing model.