Study looks into farmers’ behaviour based on forecast information, insurance in 250 Telangana villages
Can a highly accurate weather forecast change farmers’ stated beliefs about monsoon onset and impact their agricultural behaviour and investment decisions? According to new research, the answer is yes.
Providing farmers with highly accurate information (at least four to six weeks ahead) about the onset of monsoons can lead to a change in their behaviours over how much to plant, what to plant or whether to plant at all, making such forecasts an important climate adaptation tool for the agricultural sector, new research done in two districts of Telangana has shown.
The researchers from University of Chicago tracked farmers across 250 villages in Medak and Mahabubnagar districts of Telangana. They looked into how the forecast information impacts their beliefs about the monsoon onset pre-harvest, their up-front investment decisions and their well-being at the end of the growing season.
A significant research point was how their behaviour compared to that of those who received insurance. It was found that while insurance encourages optimistic farmers to invest more, it does not guide smarter choices.
The agriculture sector is highly sensitive to climate change, which is making the monsoon and other weather patterns increasingly difficult to predict. According to the World Bank, this puts 65 per cent of the world’s working poor, who depend on agriculture for their livelihoods, in jeopardy.
More and more research in recent times has been demonstrating how accurate weather forecasts, which are typically not available to farmers, are an effective tool of climate adaptation and an opportunity for countries to protect their economies from climate change by improving weather forecasting.
The 28th Conference of Parties (COP28) to the United Nations Framework Convention on Climate Change Presidency also identified improved weather forecasts as one of seven “shovel-ready” priority tools to help address the impact of climate change on food security and agriculture.
Even though monsoon onset timing is extremely important for agriculture, especially when climate change has caused disruptions in the normal weather patterns, most farmers do not have access to it.
In the present study, University of Chicago authors Fiona Burlig, Amir Jina, Erin Kelley, Gregory Lane and Harshil Sahai randomly assigned 250 villages to three groups: A group that receives forecast information at least one month in advance of the monsoon season, a comparison group that does not receive the forecast and a group that receives insurance (used as a benchmark).
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Researchers used a novel forecast of the onset of the monsoon, maintained by the Potsdam Institute for Climate Impact Research and released approximately 40 days before onset.
The forecast addresses risk by providing farmers with information about the upcoming growing season, allowing them to tailor their inputs accordingly. In contrast, insurance — the market solution for addressing risk — enables farmers to shift consumption across states but provides no information, making it a useful comparison.
In order to ensure that farmers view the forecast as credible, the researchers partnered with the International Crops Research Institute for the Semi-Arid Tropics, Hyderabad.
Disagreements on monsoon start dates
The need for accurate forecasts was highlighted by the researchers, as the study found farmers disagree widely about the start date of the monsoons. The vast majority of farmers in the study were getting their information from other farmers, with only a small minority relying on the government or other services for information on when the monsoon would begin.
The researchers first measured farmers’ own predictions about when the monsoon would begin before providing the forecast information. During this initial visit, it was found that the farmers’ predictions varied widely, even within villages.
“The more optimistic farmers believed the monsoon would come about 2.5 weeks earlier than the more pessimistic farmers. The stakes are high: An earlier monsoon typically means a longer growing season, suited to cash crops like cotton, while later monsoons are generally worse, forcing farmers to grow lower-value subsistence crops,” the study said.
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Farmers are persuaded by forecasts, find them valuable
In the year the researchers studied, the forecast predicted an average monsoon. After the researchers provided the forecast, they returned to the farmers to see if their beliefs had changed after being told the forecast information.
In this visit, they found strong evidence that the farmers changed their beliefs to be more in line with the forecast. Moreover, the farmers showed that they highly valued this information.
“They were willing to pay as much for the forecast as for an insurance product that pays out approximately 20 per cent of average crop revenue under a late monsoon,” the authors said.
Farming behaviours altered according to the forecasts
Overly optimistic farmers, for whom the forecast brought “bad news” of a shorter-than-expected growing season, took steps to cut down on their investments and expenditures. For example, they reduced the amount of land they cultivated by nearly a quarter and bought about a third less fertiliser than farmers with similar beliefs who received no information.
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While their agricultural output, crop sales and farming profits took a hit because they engaged in less farming overall, these farmers also tended to find other ways to make money. As a result of receiving the forecast, four out of seven of them newly owned a non-agricultural business, and as a group, they cut their debt in half, leading to net savings of more than $560 per farmer and an almost doubling of their business profits.
“In other words, instead of doing unprofitable farming, they were able to diversify their activities — the forecast made these farmers better off,” the research said.
Overly pessimistic farmers, who saw the forecast as “good news” that the growing season would last longer than expected, increased their investments and expenditures. For example, they increased the land they cultivated by 15 per cent and were more likely to add new crops and cash crops. This led to a 22 per cent increase in agricultural production.
Insurance encourages investment, not smarter choices
The researchers also tested how giving farmers insurance instead of forecast information would change their behaviour. Overall, farmers who received insurance increased the land they cultivated and the amount they spent on up-front investments like seeds and fertiliser.
While agricultural insurance — a widespread policy around the globe — lowers farmers’ risk exposure, it does not improve their information. Overall, farmers who received insurance increased the amount of land they cultivated and the money they spent on initial investments such as seeds and fertiliser by 12 per cent compared to those who did not receive forecast information.
This was driven by overly-optimistic farmers, who incorrectly believed it would be a better-than average year. Given the safety net the insurance provided, they responded with a large increase in investments—even though the forecast would have caused them to instead reduce investments.
On the other hand, overly pessimistic farmers for whom the forecast would have been “good news” did not meaningfully change their investments (though it would likely have been beneficial to do so) despite having the insurance.
These findings underscore the fundamental differences between insurance and forecasts and suggest that they could be used as complementary climate adaptation strategies: Forecasts let farmers make the right investments for the coming year, while insurance protects farmers against downside risk, concluded the study.
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