Investigating the agricultural losses due to climate variability: An application of conditional value-at-risk approach

Abstract

The agricultural sector is directly affected by climate variables. The presence of climate variability causes a considerable risk to agricultural productivities. Thus, risk management is an alternative to reduce risks, including optimizing the allocation of farmland and choosing crop insurance for a specific planting date. The purpose of this study is to investigate the agricultural risk management through risk measure of climate variability using the Conditional Value-at-Risk (CVaR) in rice production. This paper investigated several possible considerations of agricultural insurance premiums based on losses climate index. We concluded that the climate index insurance policy is the best choice that farmers can choose for each planting date, the higher the significance value considered, the more the value of Value-at-Risk and Conditional Value-at-Risk.