About 65% of the cropped area in India is dependent on rains. Because most of the rains in India are received during the monsoon months, the crop growing seasons are quite short. Any aberrations in the amount of rainfall or in its distribution can adversely impact the crop yields. Yield and price uncertainties often reduce the incomes of the farm households and, consequently, their consumption levels and investments. Many of the farmers in the semi-arid tropics (SAT) of India live close to subsistence level, and shielding them from the weather-induced shocks in agricultural income is vital for their survival. The SAT accounts for 37% of the country’s geographical area as well as population, 46% of the net cultivated area, 59% of the coarse cereals area, 53% of the pulses area and 60% of the oilseeds area. Even 60% of the commercial crops are grown in the SAT. If rainfed agriculture in the SAT is to remain as a means of livelihood, ex-ante risk management is a critical first step to ex-post risk coping.

China is the world's most populous country and one of the largest producers and consumers of agricultural products. It produced crops and livestock valued at $366 billion in 2004, about 50 percent more than the U.S. total. Despite limited supplies of land, water, and other natural resources, China grows most of its own food and is a major exporter of many agricultural commodities. China ranks number 1 in the world in rice paddy production with over 40 percent more production than India which ranks number 2. Importantly, China also ranks number 1 in the world in fresh vegetable production with 4 times more production than India which ranks number 2 again. China is also the largest wheat producing country in the world. In total, China ranks number 1 in the world in the production of 45 agricultural commodities (FAO, 2005).