b. What are the various ways of combating uncertainties at the farm level? c. Briefly...

b. What are the various ways of combating uncertainties at the farm level?

c. Briefly discuss the application of the following terms to agribusiness operations.

i. Hedging

ii. Futures

iii. Options

Expert Solution

Answer (b):- Uncertainities are associated with almost all the areas of operation. Likewise, there are various uncertainities related to agricultural field such as weather , price fluctuations, crop fluctuations, change in government policies etc. All of these affect the farm income on a large scale.

Below mentioned are some of the ways of combating such uncertainities:-

Crop insurance:- Crop insurance can insure farmers against heavy losses due to poor weather, insect attacks etc.
Diversification :- Farmers should not completely depend on one type of yield. Diversification will help them to deal with the uncertain events to a certain extent.
Liquidity:- Having liquid assets can help farmers to face certain contingencies such as crop failure or market slumps.
Contract Farming:- It refers to having a contractual agreement between farmers, manufacturers and suppliers. Such agreements guarantee farmers a certain price for the given products at a given time which is pre-decided.
Adopting innovative techniques of production:- Adoption of innovative techniques of production or better innovative crops could result in increased renumeration of the farmers.

Rahul Sunny answered 1 year ago

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