Temperature Insurance Index for Wheat in Tabriz County

Document Type : Research Paper

Authors

1 Professor in Agricultural Economics, University of Tabriz

2 Department of Agricultural Management, Tabriz Branch, Islamic Azad University, Tabriz, Iran

3 M.S. Graduated in University of Tabriz

10.22034/iaes.2023.2000220.1988

Abstract

In the present study, while also investigating the relationship between the rate of wheat production decline and the temperature index in Tabriz County, the Temperature Index Insurance was designed for rainfed and irrigated wheat. To assess yield risk, rainfed and irrigated wheat yields were first separated into two random (risk) and deterministic components. For this purpose, trend regression is fitted in linear, quadratic, and logarithmic forms. Then, the best functional form is selected and the de-trended yields are obtained. Using climate change data, two high-temperature (HT) and low-temperature (LT) damage indices will be calculated. Finally, according to the Burn Analysis method, the temperature index reward will be calculated based on these two metrics. However, the stationarity of the variables is tested using the ADF and DF-GLS tests. These tests indicate that the yields of both rainfed and irrigated wheat are integrated in the first order, I(1). The de-trending yield series show that yields at risk related to climate change are increasing for irrigated and rain-fed wheat and at the same time higher yields of irrigated wheat than for rainfed wheat. To calculate the heat damage index, days with a daily maximum temperature of 32°C and an average daily temperature of 27°C were considered, and for the calculation of the low-temperature damage index, a critical temperature of -10°C was chosen. Finally, the percentage premium for the temperature index was calculated. This reasonable offset on top of the 7.5% deduction for irrigated and rainfed wheat is 7.44 and 2.75%, respectively. By comparing this premium rate with the current traditional premium rate (for irrigated wheat 7.74% and for irrigated wheat 2.61%), it can be concluded that the calculated premium rate is reasonable. Therefore, it is suggested that the Agricultural Insurance Fund prioritize the implementation of temperature index insurance in the future plan.

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References

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