On the relationships among durum wheat yields and weather conditions: evidence from Apulia region, Southern Italy

From Firenze University Press Journal: Bio-based and Applied Economics (BAE)

Marco Tappi, University of Foggia

Gianluca Nardone, University of Foggia

Fabio Gaetano Santeramo, University of Foggia

Farming activities are exposed and vulnerable to several risks, among which the weather risks are increasingly frequent and impactful due to cli-mate change (Conradt et al., 2015). Among the several strategies available to reduce the weather impacts on farming systems, e.g., pest control, financial saving, agricultural and structural diversification (Vroege and Finger, 2020), the crop insurance programs can play an important role (Di Falco et al., 2014). In recent years, the attention for the weather index-based insurances (WIBIs) has been growing mainly because these tools may help to overcome some of the challenges associated with traditional indemnity-based insurances, e.g., asymmetric information, high transaction costs, moral hazard, and adverse selection (Norton et al., 2013; Dalhaus and Finger, 2016; Belissa et al., 2019; Ceballos et al., 2019).

Differently from the traditional insurances, which provide pay-outs depending on actual yield losses, WIBIs indemnify the farmers when an index, computed on rainfall or temperature and highly correlated with farms performance (e.g., yields), is triggered (Conradt et al., 2015; Dalhaus and Finger, 2016). Therefore, farmers will be indemnified when the index exceeds a pre-determined threshold (Belissa et al., 2019). Moreover, WIBIs can be manipulated neither by the insurers or the insured because they are collected from historical and current dataset provided by recognized bodies (Belissa et al., 2020; Vroege et al., 2021).

However, WIBIs present a lim-it, namely basis risk: a significant yield loss may occur even if the weather index does not trigger the payment (Conradt et al., 2015; Dalhaus et al., 2018) or a compensation may be granted even if there has not been a yield loss (Heimfarth and Musshoff, 2011). The contribution of our study is at least twofold: first, we provide empirical evidence on how yields and weather conditions are correlated, more specifically, we deepen the knowledge on the linkages between durum wheat yields and weather events occurring in susceptible phenological stages; second, we start a reflection on how stakeholders may make use of publicly available data to design an effective crop insurance scheme. We focused on the Apulia region (Southern Italy) which is the main national producer of durum wheat: almost a thousand of tons of production, i.e., accounting for 25% of the Italian durum wheat production, and about 344 thousand cultivated hectares, i.e., accounting for 28% of the Italian area utilized to grow durum wheat (ISMEA, 2020).

DOI: https://doi.org/10.36253/bae-12160

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