The foregone risk premium: a communicative and practical method for the evaluation of risk-return profiles in agriculture

Risk considerations have become increasingly important in nowadays agriculture, due to a variety of reasons. Surprisingly, the practice of formalized risk management is not widespread despite the huge amount of scientific literature on this topic. This discrepancy between risk science and extension is described by many authors. This paper presents a communicative method, rooted in financial economics, to evaluate risk-return profiles in a way that is communicative for individual farmers. The method is derived from the modern portfolio theory, in which individual assets are implicitly compared to the risk-return trade-off of that asset with the highest Sharpe ratio. We use this idea to compare individual risk-return profiles to a particular benchmark. The method can be used for evaluating different risk-return profiles of different farms, different risk management instruments and different production systems. To illustrate the communicative nature of our method, it is applied to evaluate risk-return profiles of conventional versus organic cropping systems.Risk and Uncertainty,

Smallholder farmers' motivations for using Conservation Agriculture and the roles of yield, labour and soil fertility in decision making

Conservation Agriculture (CA) has been widely promoted as an agro-ecological approach to sustainable production intensification. Despite numerous initiatives promoting CA across Sub-Saharan Africa there have been low rates of adoption. Furthermore, there has been strong debate concerning the ability of CA to provide benefits to smallholder farmers regarding yield, labour, soil quality and weeding, particularly where farmers are unable to access external inputs such as herbicides. This research finds evidence that CA, using no external inputs, is most attractive among the very poor and that farmers are driven primarily by strong motivational factors in the key areas of current contention, namely yield, labour, soil quality and weeding time benefits. This study is the first to incorporate a quantitative socio-psychological model to understand factors driving adoption of CA. Using the Theory of Planned Behaviour (TPB), it explores farmers' intention to use CA (within the next 12 months) in Cabo Delgado, Mozambique where CA has been promoted for almost a decade. The study site provides a rich population from which to examine farmers' decision making in using CA. Regression estimates show that the TPB provides a valid model of explaining farmers' intention to use CA accounting for 80% of the variation in intention. Farmers' attitude is found to be the strongest predictor of intention. This is mediated through key cognitive drivers present that influence farmers' attitude such as increased yields, reduction in labour, improvement in soil quality and reduction in weeds. Subjective norm (i.e. social pressure from referents) and perceived behavioural control also significantly influenced farmers' intention. Furthermore, path analysis identifies farmers that are members of a Farmer Field School or participants of other organisations (e.g. savings group, seed multiplication group or a specific crop/livestock association) have a significantly stronger positive attitude towards CA with the poorest the most likely users and the cohort that find it the easiest to use. This study provides improved understanding relevant to many developing countries, of smallholder farmers' adoption dynamics related to CA, and of how farmers may approach this and other ‘new’ management systems

Farm household risk balancing : implications for policy from an EU perspective

Purpose - Building on the risk balancing theory and on recent discussions the appropriateness of using farm income maximization as behavioural assumption, this paper extends the risk balancing framework by accounting for business-household interactions. The purpose of this paper is to theoretically introduce the concept of farm household risk balancing, a theoretical framework in which the farm household sets a constraint on the total household-level risk and balances farm-level and off-farm-level risk. Design/methodology/approach - The paper argues that the risk behaviour of farmers is better understood by considering risk at the household level. Using an analytical framework, equations are derived linking the farm activities, off-farm activities, consumption and business and private liquidity. Findings - The framework shows that a farm household that wants to minimize the risk that total household cash flow falls below consumption needs, may exhibit a wide variety of behavioural responses to changes in the policy and economic environment. Social implications - The framework suggests multiple ways for policy makers and individual farmers to support risk management. Originality/value - Risk management is at the core of the agricultural policy and it is of paramount importance to be able to understand behavioural responses to market and policy instruments. This paper contributes to that by suggesting that the focus of current risk analysis and management studies may be too narrowly focused at the farm level

A systemic integrative framework to describe comprehensively a swine health system, Flanders as an example

A well-functioning swine health system is crucial to ensure a sustainable pig production. Yet, little attention has been paid to understand it. The objective of this study was to unravel the complexity of a swine health system by using a systems-thinking approach for the case of Flanders (Northern part of Belgium). To that end, qualitative interviews were held with 33 relevant stakeholders. A hybrid thematic analysis was conducted which consisted of two phases. First, an inductive thematic analysis was conducted and second, the resulting themes were classified into the building blocks of a systemic framework. This framework combined a structural and a functional analysis that allowed to identify the key actors and their functions. Additionally, a transformational analysis was performed to evaluate how structures and the entire swine health system enable or disable functions. Findings revealed that the Flemish swine health system presents several merits such as the synchronization of policies and sector's agreements to reduce the antimicrobial use in the pig sector and the presence of a rich network of universities and research institutes that contribute to the education of health professionals. Nevertheless, several systemic failures were observed at different levels such as the lack of a good professional body representing the swine veterinarians, the tradition that veterinary advice is provided for 'free' by feed mill companies, and the shortage of reliable farm productivity data. Both latter failures may hinder swine practitioners to provide integrative advice. While few veterinarians are remunerated per hour or per visit by farmers, the most common business model used by veterinarians is largely based on the sale of medicines. Thus, veterinarians encounter often a conflict of interest when advising on preventive vaccinations and, in turn, farmers distrust their advice. On a positive note, alternatives to the traditional business model were suggested by both veterinarians and farmers which may indicate that there is intention to change; however, the broader institutional and socio-cultural environment does not enable this evolution. The results of this study can aid policy makers to anticipate the effects of proposed interventions and regulations so that they can be fine-tuned before they are enforced

Unpacking the drivers behind the use of the Agricultural Innovation Systems (AIS) approach: The case of rice research and extension professionals in Sierra Leone

Agriculture Innovation System (AIS) thinking and approaches are largely perceived as a sine-qua-non for the design and implementation of effective and sustainable agriculture development programmes. AIS has gained popularity in the agriculture innovation literature and has been embedded in policy documents of agriculture sector institutions in many countries. However, there is much less evidence of AIS thinking influencing the behaviours of research and extension institutions and staff ‘on the ground’. An important research gap is the need to better understand the attitudes and beliefs of extension and research professionals regarding AIS and that drive behaviours. Sierra Leone, like most developing countries, has embraced the use of AIS (at least in theory) as evident in policy documents of government institutions – the leading innovation system actors in the country. This study uses the Theory of Planned Behaviour (TPB) to assess the cognitive foundation of agricultural research scientists and extension professionals' intention to use the AIS approach related to rice innovation (the country's staple food crop). Results show there are significant differences in intention which relate to organisation affiliation, age, and gender. Moreover, those with a high intention to use the AIS approach have significantly stronger beliefs associated with the benefits of AIS including its ease of use and the positive effects it is likely to have on smallholder farmers' food security and ability to innovate. Those with a high intention to use the AIS approach also perceive stronger social pressure from key social referents such as colleagues, employers and supervisors; suggesting that policies and an organisation's vision have a significant bearing. Furthermore, the findings suggest that impediments to the use of AIS relate to lack of finance and knowledge. Unpacking these beliefs allows possible entry points to be identified which can enhance the functioning of existing AISs and newly formed ones. The findings and framework presented are useful for many developing countries where AIS approaches are being tested