This thesis is concerned with determining the potential of weather derivatives as a weather risk management tool for Australian wheat farmers. The research is intended to provide the fledgling Australian weather derivative market and the Australian agricultural industry with indications of their potential for weather risk management. It provides information to agricultural producers on their usefulness, as well as providing information to Australian banks and other underwriters as they attempt to establish weather derivatives in their current risk transfer portfolios. A review of the weather derivatives literature is presented, followed by research on different areas of weather derivative use by Australian farmers. The applications of this research focus on wheat producers in New South Wales and southern Queensland in the wheat-sheep belt; and provides a basis for further analysis of weather derivatives in other Australian agricultural industries.