Managing Weather Risk in Seed Business Essay

1623 Words Nov 28th, 2012 7 Pages
Managing Weather Risk in Seed Business Weather Risks of a Seed Company Weather risk for a seed company is the risk of drop in sales volume on account of adverse weather conditions like excess / deficit in rainfall, extreme temperature and humidity conditions etc. Indian agriculture is predominantly dependent upon monsoon rains, with more than 60% of cultivated area in Kharif being rainfed. This rainfed nature of Indian agriculture makes the business of agri-input company completely dependent upon weather. Very often seed companies find themselves holding large unsold stock because of adverse weather conditions like insufficient or untimely rainfall. Seed companies also find it difficult to move stock from one location to the other because …show more content…
These companies have very ad hoc weather risk identification and response mechanism which is based on experienced of field-level staff. This guess estimation process delays the information flow to the top management inhibiting any corrective logistical measures central management team could have taken to minimize and avoid losses. Table below shows the response mechanism generally adopted by companies for weather risks of varying magnitude. The table also suggests solutions / changes in existing response mechanism in form a more scientific approach towards management of weather risks.
Particulars Low Risk Event • Very Localized Event • Impacts one or two districts • Diffcult to predict • Minor logistical changes involving movement of goods to nearby districts having sustained demand • Guess-estimates and post happening of events • Delayed response because of nonavailability of data and vague understanding of weather impact • Not Significant Moderate Risk Event • Wider Geographical Spread covering agroclimatic zone or state Can be predicted • Requires more intense planning involving moving goods from weather hit locations to states with sustained demand. • Guess-estimates and post happening of events • Delayed response because of nonavailability of data and vague understanding of weather impact • May result in sales losses at aggregate level • More

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