Uncertain Monsoons, Weather Risks and Crop Yields

Abstract This paper studies the relationship between weather and crop yields with a specific focus on the influence of delayed monsoon arrival on crop yields. In doing so, we add to the existing literature by focusing on a relatively less explored dimension of weather, that is, the impact of the arrival of monsoon on crop yields. Secondly, we study how monsoon arrival and other weather variables influence the entire probability distribution of crop yields. Therefore, we capture a much clearer picture of the distribution of weather-related production risks. Using the moment-based approach pioneered by Antle (1983), we find that besides reducing the mean crop yields, monsoon arrival also increases the crop yields variance and leads to an increase in downside risk to the farmers. We have also shown that delayed monsoon arrival increases the occurrence of extreme outcomes for the crop yields by having its impacts on the fourth moment of the crop yield distribution. Besides, we have shown the role played by irrigation in reducing crop yields variance and in reducing the exposure of crop yields to the downside risk and occurrence of extreme outcomes. JEL Classification: Q10, Q18, Q50, G22