The Role of Income Insurance on Darab Cotton Tiller's Risk Management

Agricultural activities have been always faced with production, price and income fluctuations. At the time, attention to management procedures can be very useful in order to reducing these fluctuations. Income insurance with covering risks due to fluctuations in prices and production, able to covered the fluctuations of crop income. The purpose of this study is to design income insurance in order to reducing the income fluctuations of Darab cotton tillers. Required information were collected through questionnaire which was conducted in a sample 50 Darab cotton farmers by a multi stage sampling random method. Furthermore, due to forecasting futures values, time series data that collected from various recourse of cotton tillers cooperative union and agriculture organization was used. For computing the insurance premiums, a statistic simulation method called bootstrapping was used. The results relative to computed income insurance premiums, analyzed with two hypotheses such as direct and indirect relationships between yield and price. Ultimately, it became clear that applying direct relationship between yield and price due to negative correlations of these two variables can cause reduction of income insurance. Comparing the present value with computed income insurance premiums showed the superiority of income insurance scheme. The value of income insurance premiums for poor and rich farmers with assumptions "0.9 loading coefficient and 65% government subsides", computed 0.81789 and 25.60451 dollars respectively. At the end its presented suggestion to aim the appropriate risks management. The most important suggestion is creation a bilateral solidarity between farmer and insurer, Another one is election of income insurance scheme as final policy for poor group.