An Analysis of Risk Management in Rainfed Agriculture: A Case of Soybean in Madhya Pradesh
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Date
2016
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DIVISION OF AGRICULTURAL ECONOMICS ICAR-INDIAN AGRICULTURAL RESEARCH INSTITUTE NEW DELHI
Abstract
The agriculture sector in a rainfed region is exposed to a variety of risks. The element of
risk has differentiated effect on various farm categories. A large number of factors
contribute to farm risks- changes in weather, market prices of inputs and outputs, and a
range of macroeconomic factors/ policy decisions. Soybean is an important oilseed crop
cultivated in India, mostly under rainfed conditions. In this context, the present study is
undertaken to analyse the risk in soybean cultivation, risk management strategies adopted
by the farmers in cultivation of the crop, and the factors influencing the adoption decision.
The study also estimated the potential economic benefits arising out of cultivation of
improved soybean varieties in rainfed regions, including a variety having drought
resistance property (NRC- 7). The study uses both primary and secondary data. The
primary data was collected for the year 2014-15 from Indore district of Madhya Pradesh,
the largest producer of soybean in India. The mean income and variance decomposition
analysis using Hazell's (1982) method showed the positive role of yield in raising the
revenue and the larger role of price changes in the revenue variance. The farmers’
economic status was weak, notably small farmers. Cropping intensity was more in small
farmers compared to large farmers. At the time of distress livestock holding of small
farmers act as a cushion to absorb revenue shocks. Farm business income of small farmers
on a hectare basis was higher than that of large farmers. The major risks were related to
rainfall, drought and biotic factors like diseases and pest. The major adaptation strategies
were intercropping, crop insurance, micro-irrigation and varietal diversification. Logit
regression analysis has been used to estimate the potential factors determining the
adoption of drought resistant soybean varieties, micro-irrigation and crop insurance. Tobit
model was used to estimate the determinants of varietal diversification. The analyses
revealed the role of risk perception, membership in farmers’ organizations, soil quality,
irrigation, and non-farm income in adoption of these management practices. The study
points to the need to facilitate adoption of risk management strategies. The study has
revealed large level of economic benefit out of cultivation of improved varieties of
soybean (JS 93-05, JS 95-60 and NRC-7). The potential mean annual benefit including
economic surplus and risk reduction benefits was Rs 3161 million, Rs 6291 million and Rs
685 million, respectively for the above varieties estimated at social discount rate of 5.2 per
cent, given the current adoption rate. The risk benefits accounted for about 84 per cent of
total benefit in NRC-7. In a drought like situation, the potential reduction in total benefit
was much lower for NRC-7 compared to other varieties, pointing to the income stabilizing
role of drought resistant varieties. The study highlights the potential of abiotic-stress
resistant varieties in income stabilizing, notably in the context of climate change.
Description
T-9522
Keywords
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