Weather risk management by Saskatchewan agriculture producers Saqib Khan and Morina Rennie Faculty of Business Administration, University of Regina, Regina, Canada, and Sylvain Charlebois College of Management and Economics, University of Guelph, Guelph, Canada Abstract Purpose – The purpose of this research is to study the weather risk management practices of agriculture producers. In particular, the authors look at the extent to which farmers use weather derivatives to complement insurance. Unlike insurance, weather derivatives mitigate risk associated with low intensity, high probability events and therefore offer the potential of a more complete hedge than insurance alone. Design/methodology/approach – The authors conducted a survey of grain farmers in the province of Saskatchewan, Canada, a typical jurisdiction in which farmers tend to face weather events that are high in frequency but low in severity, to study the usage of weather derivatives compared to insurance and identify the hurdles to their usage. Findings – The authors find that fewer than 10 percent of their respondents use weather derivatives. Consistent with previous literature in other contexts, they identify participation costs, especially lack of awareness, to be the most significant hurdle to their usage. Research limitations/implications – A limitation of this study is that the data were collected using a survey methodology and are therefore subject to the usual risks of bias associated with that approach. Moreover, because the authors’ survey was delivered online, it may have favoured the participation of farmers that were more comfortable with technology and some bias may have also been introduced into the data as a result. Practical implications – The authors’ findings suggest that there is significant potential to improve farmers’ ability to hedge weather risk and thereby improve economic outcomes if the major barriers to the usage of weather derivatives can be overcome. The study paves the way for further research to support the development of public policy strategies that could help farmers take advantage of weather derivatives as part of their inventory of risk management tools. Originality/value – To the authors’ knowledge this is the first study that quantifies the usage of weather derivatives by agriculture producers and identifies the hurdles. Keywords Weather derivatives, Risk management, Weather insurance, Agricultural finance, Hedging, Insurance, Agriculture, Finance Paper type Research paper The current issue and full text archive of this journal is available at www.emeraldinsight.com/0002-1466.htm The authors would like to thank Matthew Pot for the research assistance, and the seminar participants at the University of Regina for their valuable comments. This research was partially funded by the University of Regina, Faculty of Business, Deans’ Research Grant, and by the Saskatchewan Ministry of Agriculture and the Canada-Saskatchewan Growing Forward bi-lateral agreement. The authors appreciate the valuable comments by an anonymous referee, and the Editor of AFR, Dr Calum Turvey. Agricultural Finance Review Vol. 73 No. 1, 2013 pp. 161-178 q Emerald Group Publishing Limited 0002-1466 DOI 10.1108/00021461311321375 Weather risk management 161