Improving the Socio-Economic Lot of Farmers in Thailand through Area-Yield Rice Crop Insurance at District Level

Abstract

Thai farmers face various risks associated with natural disasters, adversely affecting their income. Such events appear to be increasing each year in Thailand, which is one of the world leaders for harvested area of rice. Despite this, its yields are lower than various nations with a considerably smaller crop area. With a view to helping farmers to manage the relevant risks and so improve their socio-economic lot, there is a real need to adopt an agricultural financial tool called 'area-yield crop insurance'. Therefore, on the basis that area selection is the first key step towards introducing this type of policy at district level, this paper aims to group together similar districts. Hence the author conducted a cluster analysis of districts in six provinces in north-eastern Thailand. The results reveal differences between rice cultivation in the districts studied but also certain similarities, with the characteristics of some districts in a given province resembling those of districts in one or more other provinces. As a result, five groups of similar districts are mooted. These clusters, each having their own features, provide a powerful and useful mechanism for practical implementation, enabling the expected premium rates to be tailored better to the local context and mitigating a specific drawback, namely the basis risk of a prospective area-based crop insurance policy for the designated area.