In the event of an external weather shock, say a prolonged and severe drought occurs during the growing season in the main agricultural grain growing belt of a country, what impact will the drought most likely have on farmers? Explain how yields will be affected? Explain what is likely to happen to grain prices?

What steps can grain farmers and other types of farmers take do to mitigate the ill effect of bad weather and to guarantee a set level of income? Should Government intervene to help farmers and in what ways? List to the advantages and disadvantages of different courses of action.