Agriculture is a complex system, within which changes are driven by the joint effects of economic, environmental, political and social forces (Olmstead 1970; Bryant and Johnston 1992). It is very well known that agriculture is inherently sensitive to climate conditions and is among the sectors most vulnerable to weather and climate risks. Of the total annual crop losses in world agriculture, many are due to direct weather and climatic effects such as droughts, flash floods, untimely rains, frost, hail, and severe storms (Hay 2007). Chattopadhyay and Lai (2007) estimated that around 28% of the land in India is vulnerable to droughts, 12% to floods and 8% to cyclones. But in the year 1918, which was ranked as the worst drought year of the last century in India, about 68.7% of the total area of the country was affected by drought (Chowdhury et al. 1989).
Farm decision-making is seen as an on-going process, whereby producers are continually making short-term and long-term decisions to manage risks emanating from a variety of climatic and non-climatic sources (Ilbery 1985). tte decisions farmers make have a significant impact on the returns to their investments and on their overall family welfare, tte climate-based decisions that farmers make are mainly strategic in nature eg., choice of a crop/cropping system, allocation of acreage, purchase of inputs such as seed and fertilizer ahead of the cropping season, etc. In contrast, the weather-based decisions are tactical in nature and affect the operational activities such as sowing, fertilizer application, irrigation, weeding, harvesting, etc. Farm-level risk management strategies have to deal with both the changing and variable climatic conditions as well as the weather conditions.
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