Do Satellite Data Correlate with In Situ Rainfall and Smallholder Crop Yields? Implications for Crop Insurance

Abstract

Adverse weather is one of the most prevalent sources of risk in agriculture. Its impacts are aggravated by the lack of effective risk management mechanisms. That is why resource-poor farmers tend to respond to weather risks by adopting low-capital investment, low-return, and low-risk agricultural practices. This challenge needs to be addressed with innovative risk management strategies. One of the tools that is gaining traction, especially in the developing countries, is weather-index-based insurance (WII). However, WII uptake is still low because of several constraints, one of which is basis risk. This study attempts to address this problem by evaluating the suitability of TAMSAT, CHIRPS, MODIS, and Sentinel-2 data for WII. We evaluated the first three datasets against in situ rainfall measurements at different spatial and temporal scales over the maize-growing season in a smallholder farming area in South Africa. CHIRPS had higher correlations with in situ measured rainfall data than TAMSAT and MODIS NDVI. CHIRPS performed equally well at 10 km and 25 km spatial scales, and better at monthly than daily and 16-day time steps (maximum R = 0.78, mean R = 0.72). Due to the lack of reliable historical yield data, we conducted yield surveys over three consecutive seasons using an objective crop cut method. We then assessed how well rainfall and NDVI related with maize yield. There was a poor relationship between these variables and maize yield (R2 ≤ 0.14). The study concludes by pointing out that crop yield does not always have a linear relationship with weather and vegetation indices, and that water is not always the main yield-limiting factor in smallholder farming systems. To minimize basis risk, the process of designing WII must include identification of main yield-limiting factors for specific localities. Alternatively, insurers could use crop water requirement methods to design WII.