Risk management of agricultural supply chain in China with weather compensatory contract

This paper is based on some situations in China that agricultural products are transported directly to distribution centers and / or super markets. The retailer supplies an additional weather compensatory contract to the farmer before the planting time, in which the compensatory parameters are designed according to the forecast of temperature of the forthcoming demanding season. Such kind of contract can induce farmer to plant more properly to meet the market demands and increase the farmer?s profits at the same time control market risk. This contract also helps the retailer as well as the farmer to reduce their weather risks.