Market demand for wheat is relatively stable over time but market supply of wheat is very much influenced by the weather. For example, a natural drought decreases the supply of wheat and pushes up its prices while a bumper crop can severely depress wheat prices. Acts of nature thereby can result in large increases or decreases in the prices of agricultural commodities. The profitability of farmers becomes uncertain, as does the prices of food products and income needed to feed a household.”

Keeping in view the scenario (A), suggest the most appropriate action that the government should take in this situation in order to stabilize the wheat farmer’s income and to encourage them to continue farming whether there are bumper crops or droughts.

"University" is not the subject of your question

A Yesser posted this very question yesterday. My response to you and to him is essentially the same:

Take a shot, what do you think?

Hint: Is an insurance policy a common product that people obtain to avoid financial risks?

There is an awful lot of coffee in Brazil; it supplies a large share of the world market. In 1994, people first began to realize that a frost in Brazil would cause havoc with the 1995 harvest. The economist magazine at that time reported estimates that the 1995 crop would be less than that of 1994. It was obvious that coffee was going to be scarce in 1995. Anticipating this situation, speculators bought coffee in 1994, bidding up its price even before the supply fell. Following table shows the price rise of coffee during these years.

To stabilize the wheat farmer's income and encourage them to continue farming despite unpredictable weather conditions, the government can take several possible actions:

1. Income Stabilization Programs: Implement income stabilization programs that provide financial support to farmers during periods of low crop yields or low market prices. These programs could include direct cash payments, crop insurance, or price guarantees.

2. Diversification Support: Encourage farmers to diversify their crops and invest in alternative sources of income. This can help mitigate the risk of solely relying on wheat production and reduce their vulnerability to extreme weather events.

3. Research and Development: Invest in research and development efforts to develop more resilient and drought-resistant wheat varieties. This can help farmers produce higher yields even in adverse conditions, reducing the impact of natural disasters on their income.

4. Infrastructural Support: Improve infrastructure to enhance irrigation systems and water management practices. By providing reliable access to water, farmers can mitigate the effects of drought and maintain steady crop production.

5. Market Access and Price Stabilization: Support farmers' access to wider markets and facilitate fair and transparent price mechanisms. This can include improving transportation and storage infrastructure, promoting fair trade policies, and ensuring proper market information dissemination.

6. Training and Education: Provide training and education programs to farmers on sustainable farming practices, crop management, risk management strategies, and business skills. This will enhance their ability to adapt to changing conditions and make informed decisions.

It is important for the government to consider a combination of these measures to create a supportive environment for wheat farmers and enable them to continue farming despite the uncertainties associated with weather fluctuations.