Evidence for Policy
PASIC uses research to provide evidence of key characteristics and opportunities on agricultural intensification.
By BJORN VAN CAMPENHOUT, et al
To feed a growing and increasingly urbanized population, Uganda needs to increase crop production without further exhausting available resources. Therefore, smallholder farmers are encouraged to adopt sustainable crop intensification methods such as inorganic fertilizer or hybrid seeds. But farming is an inherently risky business, and it is often argued that the use of such modern inputs exposes poor households to even more risk. Farmers already use a host of risk management and risk coping strategies to deal with risk. Perceived risk associated with the use of modern inputs thus adds to this risk, and risk avoidance and inability to take on risk may be important to understand the lack of sustained intensification.
In 2014, we collected a socio-economic data from a random sample of about 880 small-holder farmers. We recorded use of modern inputs and technology, such as fertilizer, pesticides and improved seeds, and also, we collected information on risk management and coping strategies that are known to be used by small-holder farmers. We then conducted exploratory data analysis using this observational data to search for patterns that are consistent with the hypothesis that farmers that are better able to manage risk are also more likely to engage in sustainable crop intensification.
We found out that households that engage in private investment in risk reducing technologies have a higher probability of using modern inputs. For instance, investing in mobile phones, which is likely to reduce price risk when selling crops, leads to a higher probability of using fertilizer and pesticides. Farmers that invest in storage, which reduces the risk of post-harvest losses, are more likely to use pesticides, herbicides and fungicides.
Our results indicate that farmers with a more diversified crop portfolio are also more likely to engage in crop intensification.
In the absence of formal credit and insurance markets, precautionary savings, often in the form of non-financial assets such as livestock, is probably the most effective way to protect against common shocks. We find a positive relationship between the value of livestock assets and the propensity to use fertilizer and pesticides.
Analysis and discussion
Our analysis suggests that risk is indeed an important barrier to sustainable crop intensification practices among smallholder rice and potato farmers. We find that households that engage in risk management strategies are more likely to practice intensified cropping. However, our data also show only limited downside yield-risk associated with the use of fertilizers or pesticides, suggesting that part of the problem is related to perception.
Conclusions and implications for policy and development
Since agricultural risks are interrelated and farmers are managing risk through a system of interrelated strategies, agricultural risk management policies should take a holistic approach. While some policies or interventions may crowd out other risk management strategies, others may reinforce each other. Bearing this in mind, we propose a comprehensive agricultural risk management policy that should pay attention to calamity insurance and social safety nets, promote development of risk market, agricultural price risk management, risk reducing public investments, contract farming and changing farmer’s perceptions.