Productivity,credit, risk,and the demand for weather index insurance in smallholder agriculture in Ethiopia

The article explores the relationship between fertilizer use and the demand for weather index insurance (WII) among smallholder farmers in Ethiopia. We examine whether fertilizer use is profitable under current smallholder production conditions, whether risk‐related factors affect fertilizer use, and we estimate the returns to inputs in the agricultural production function in the absence of insurance. We then study how these primitives of agricultural production functions relate to insurance demand. The study compares a survey‐based estimate of willingness to pay with actual uptake for the weather insurance, finding the stated and actual demand to be almost completely uncorrelated. While those with high marginal returns to inputs say they would purchase insurance, only those with low marginal returns actually do, consistent with the stated purpose of the product as input insurance. Insurance demand proves to be highly responsive to the existence and amount of randomly allocated insurance vouchers.     

Factors influencing the profitability of fertilizer use on maize in Zambia

Fertilizer use remains very low in most of Africa despite widespread agreement that much higher use rates are required for sustained agricultural productivity growth. This study uses longitudinal farm survey data to estimate maize yield response functions in a relatively high-potential zone of Zambia to determine the profitability of fertilizer use under a range of small-farm conditions found within this zone. The theoretical framework used in this study incorporates agronomic principles of the crop growth process. We generalize the asymmetric production models and define a concept of yield scaling factors. The model distinguishes different roles of inputs and non-input factors in crop production. We estimate the effects of conventional production inputs as well as of household characteristics and government programs on maize yield. The results indicate that recommended fertilizer application rates in the two specific years were often unprofitable, given observed price conditions and the yield response to fertilizer. However, there was substantial variability in yield response to fertilizer based upon the rate of application, the timeliness of fertilizer availability, the use of animal draught power during land preparation, and whether the household incurred the death of an adult member in the past three years. These modifying factors, as well as variations in input and output prices due to proximity to roads and markets, substantially affected the profitability of fertilizer use on maize.     

Fertilizer subsidies and private market participation: the case of Kano State,Nigeria

This article estimates the effect of a fertilizer voucher program on farmer participation in the private fertilizer market in Nigeria. Using a double‐hurdle model (to address corner solution challenges with estimating input demand) and a control function approach (to account for the endogeneity of subsidized fertilizer acquired), the study finds evidence that receiving subsidized fertilizer in Kano, Nigeria increased both the probability and extent of participation in the private fertilizer market. Findings demonstrate that under certain circumstances, e.g., where input dealers’ links to farmer are weak; there could be significant gains from the temporary use of voucher programs to strengthen such links.     

Soil,Striga, or subsidies? Determinants of maize productivity in northern Ghana

High yield gaps persist in sub‐Saharan Africa and increased fertilizer use is considered among the crucial measures to increase productivity. Despite high government investments, particularly in fertilizer subsidy programs (FSPs), overwhelming evidence has revealed their inefficiency. This study employs a multidisciplinary approach to identify the determinants of low maize yields in the Guinea savanna zone of Ghana. We conducted a socioeconomic household survey and analyzed plot‐specific soil samples. Econometric models were estimated based on both socioeconomic and soil variables. The results show that a common parasitic weed, Striga, and labile soil structure have significant effects on yield in the study region. Plot sizes were recorded both from farmers’ direct elicitation and using GPS devices. Considerable discrepancies were detected between self‐reported and GPS‐measured plot sizes. Fertilizer samples from randomly selected agro‐input shops were analyzed to control for adulterated or fake inputs. The measured nutrient contents of the samples reflected the composition indicated on the package labels. Findings underline the need of site‐specific data collection, supported by laboratory‐based soil test results, to efficiently address low productivity. Although there are no signs of fertilizer adulteration, governance challenges persist in targeting, timing, and elite capture in the distribution system of the subsidy program. The study shows that the FSP has not been an effective standalone measure. Rather, the government needs to invest in capacity building and extension services to address the site‐specific problems through comprehensive soil fertility management techniques and weed control. Promoting soil carbon management, minimum mechanical stress, crop rotation, and permanent soil cover should be further investigated as options for the region.     

Factors explaining the low and variable profitability of fertilizer application to maize in Zambia

It is widely recognized that an “African green revolution” will require greater use of inorganic fertilizers. Often‐made comparisons note that fertilizer use rates in Africa are just 10–20% of those in Asia, Europe and the Americas. Most attempts to explain relatively low‐adoption of fertilizer assume yield responses to inorganic fertilization warrant higher application rates and hypothesize that observed use rates are limited by market‐based factors. Another explanation may be that application rates are low because African yields are less responsive to inorganic fertilizer than yields in other regions, and less responsive than analysts perceive. Examining the case of Zambia, we evaluate whether yield response to fertilizers could explain adoption and application rates. A model of yield response is constructed and a combination of estimators is employed to mitigate potential biases related to correlation between fertilizer use and unobserved heterogeneity as well as stochastic shocks. Results indicate higher fertilization rates would be marginally profitable or unprofitable in many cases given commercial fertilizer and maize prices. Phosphoric fertilizer is particularly unprofitable on acidic soils, which are common in Zambia and other areas of sub‐Saharan Africa. We propose feasible recommendations for diversifying the current government strategy to enhance crop productivity.     

Does sustainable intensification of maize production enhance child nutrition? Evidence from rural Tanzania

Food insecurity, child malnutrition, and land degradation remain persistent problems in sub‐Saharan Africa. Agricultural sustainable intensification (SI) has been proposed as a possible solution to simultaneously address these challenges. Yet there is little empirical evidence on if agricultural management practices and inputs that contribute to SI from an environmental standpoint do indeed improve food security or child nutrition. We use three waves of data from the nationally‐representative Tanzania National Panel Survey to analyze the child nutrition effects of rural households’ adoption of farming practices that can contribute to the SI of maize production. We group households into four categories based on their use of three soil fertility management practices on their maize plots: “Nonadoption”; “Intensification” (use of inorganic fertilizer only); “Sustainable” (use of organic fertilizer, maize–legume intercropping, or both); and “SI” (joint use of inorganic fertilizer with organic fertilizer and/or maize–legume intercropping). The results from multinomial endogenous treatment effects models with the Mundlak–Chamberlain device suggest that use of practices in the “SI” category is associated with improvements in children's height‐for‐age and weight‐for‐age z‐scores relative to “Nonadoption,” particularly for children aged 25–59 months. These effects appear to come through improvements in both crop income and productivity.     

Modeling fertilizer externalities around Palo Verde National Park,Costa Rica

Irrigated rice farming in Costa Rica involves use of agrochemicals that pollute important wetlands ecosystems, such as the Palo Verde National Park in the northeastern province of Guanacaste. We characterize rice farming in this region, apply duality theory to estimate conditional factor demand for fertilizer, and then simulate the impacts of alternative policies on fertilizer use. Using a normalized profit function, we also estimate policy impacts on farmer profits. As expected, prices of rice seeds and fertilizer significantly affect use of fertilizer. Price incentives or taxes could encourage farming practices that reduce the threat to downstream ecosystems.     

Do input subsidy programs “crowd in” or “crowd out” commercial market development? Modeling fertilizer demand in a two‐channel marketing system

Many governments in developing countries distribute fertilizer at subsidized prices in an effort to stimulate small farmers' agricultural productivity and food security. Prior fertilizer demand studies have largely failed to account for the effects of government programs on farmers' commercial purchases. Using a double hurdle model and nationally representative rural household panel data in Zambia, we distinguish between these sources and measure the contemporaneous "crowding in" and "crowding out" effects of government input programs on commercial fertilizer sales. Where the private sector is relatively active and average wealth is higher (areas seemingly more likely to be targeted by government programs), results indicate that subsidies have substantially crowded out the private sector, in some cases to the point that such programs could actually lower overall fertilizer use. On the other hand, in poorer areas where the private sector is relatively inactive, subsidies help to generate demand and crowd in private sector retailers. Empirical studies explicitly modeling farmers' fertilizer purchase behavior within a dual marketing framework can provide important insights for agricultural policy discussions in developing countries.     

Determinants of agricultural land rental market transactions in Bangladesh

Land rental market transactions have been the norm in land scarce rural Bangladesh mainly due to the inadequacies of the governmental land distribution system to meet the growing demand for land and to correct imbalances in factor proportions at the farm-level. The present study jointly determines the socio-economic factors underlying decision to rent-in land and/or rent-out land by the Bangladeshi farmers in the land rental market using a bivariate Tobit model. The model diagnostic reveals that the decisions to rent-in and/or rent-out land is significantly correlated, implying that univariate analysis of such decisions are biased, thereby, justifying the use of a bivariate approach. Results reveal that a number of socio-economic factors affect farmers’ participation in the land rental market and work in opposite directions regarding the decision to rent-in or rent-out land. The likelihood of renting-in land is higher for farmers with inadequate cultivable land but with higher levels of livestock and other farm capital asset ownership, and also for those located in areas with developed infrastructure and fertile soils. On the other hand, the likelihood of renting-out land is higher among farmers with higher levels of cultivable land but inadequate farm capital and livestock resources, higher levels of education, less subsistence pressure, and poor extension contact. Geography does matter, as the likelihood of land transactions is higher in agriculturally intensive and/or developed regions. Government policy has an important role to play to improve the factor equalisation role of these land rental markets through, for example, investment in education, agricultural extension, rural infrastructure and the livestock sector.     

Smallholders,institutional services,and commercial transformation in Ethiopia

This article examines the role of institutional services of credit, input supply, and extension in the overall commercial transformation process of smallholder agriculture in Ethiopia. Survey data collected in 2006 from 309 sample households in three districts of Ethiopia are used for the analyses. Tobit regression models are used to measure the effect of access to services on the intensity of inputs use for fertilizer and agrochemicals. A probit model is used to measure these effects on the adoption of improved seeds. Intensity of use of seeds is analyzed using an ordinary least squares model. Logarithmic Cobb–Douglass functions are estimated to analyze the effect of access to services on crop productivity. Heckman's two‐stage estimation is used to examine determinants of household market participation and the extents of participation. Results show that access to institutional support services plays a significant role in enhancing smallholder productivity and market orientation. Our results imply that expanding and strengthening the institutional services is critical for the intensification and market orientation of smallholder agriculture in Ethiopia. In particular, appropriate incentives and regulatory systems are urgently needed to encourage the involvement of the private sector in the provision of agricultural services.     

Adding value to spatially managed inputs by understanding site-specific yield response

Many mechanized crop producers and agribusinesses are fascinated with precision agriculture technology, but adoption has lagged behind the expectations. Among the reasons for slow adoption of precision agriculture technology is that initial users focused excessively on in‐field benefits from variable‐rate fertilizer application using regional average fertilizer recommendations. This article illustrates how greater use of site‐specific crop response information can improve variable rate input application recommendations. Precision agriculture is spatial information technology applied to agriculture. The technologies include global position systems (GPS), geographic information systems (GIS), yield monitoring sensors, and computer controlled within‐field variable rate application (VRA) equipment. Experimentation with these technologies is occurring everywhere there is large scale mechanized agriculture. Commercial use has been greatest in the US, where 43% of farm retailers offered VRA services in 2001. Except for certain high‐value crops like sugar beet, farmer adoption of VRA has been modest. The farm level profitability of VRA continues to be questionable for bulk commodity crops. The theoretical model and illustration presented here suggest that VRA fertilization has not yet reached its profitability potential. Most VKA field trials to date have relied upon existing state‐wide or regional input rate recommendations. Unobserved soil characteristics can potentially interact with an input to make its effect on yield vary site‐specifically within fields. Failure to use site‐specific response functions for VRA applications may lead to a misallocation of inputs just as great as that which results from using uniform applications instead of VRA. Agricultural economists have a long history of estimating output response to input applications. Several have started to develop tools to estimate site‐specific responses from yield monitor and other precision agriculture data. Likewise, agricultural economists have developed an important body of research results on information value based on managing variability—typically in temporal settings. With these tools, a major potential exists to develop further benefits from precision agriculture technologies that permit truly spatially tailored input applications.     

Tenure security, resource poverty, public programs, and household plot-level conservation investments in the highlands of northern Ethiopia

Land degradation poses a serious problem for the livelihoods of rural producers. Furthermore, there is rarely enough private investment taking place to commensurate the scale of the problem. This article examines the role of tenure insecurity, resource poverty, risk and time preferences, and community‐led land conservation on differentiated patterns of household investment in land conservation in northern Ethiopia. We control for biophysical, household characteristics, market access conditions, and village level factors. Investments in soil bunds and stone terraces are specifically studied so as to capture the link between these various factors and the durability of conservation investments. We introduce the distinction between the determinants of the decision to invest and how much to invest in conservation. Regression results show that publicly led conservation programs seem to significantly stimulate private investment. A host of plot‐level variables and household perceptions of returns on conservation investments, expressed in terms of perceived improvements in land quality and increased crop yields, were found to be critical to the decision to invest and intensify soil conservation. The evidence on the significance of households' attitudes toward risk aversion suggests the important role of risk and the household's risk‐bearing capacity in the decision to intensify conservation measures. At the same time, tenure security indicators and households' resource endowments (resource poverty) had weaker effects in increasing willingness to invest and the level of investment made. The policy implications of these results point to the importance of agricultural research and extension efforts that target technologies which reduce household risk and poverty while enabling sustainable investments in conservation measures by individual households.     

Economic impacts of integrated pest management (IPM) farmer field schools (FFS): evidence from onion farmers in the Philippines

This article comprehensively examines the impact of integrated pest management‐farmer field school (IPM‐FFS) on yield, insecticide expenditures, labor expenditures, herbicide expenditures, fertilizer expenditures, and profit, based on data from onion producers in the Philippines. Propensity score matching (PSM) and regression‐based approaches that account for potential bias due to selection problems from observable variables are used to achieve the objective of the study. Sensitivity of our IPM‐FFS impact results to potential bias due to “selection on unobservables” was also assessed. We find that farmers who participate in the IPM‐FFS training program have statistically lower insecticide expenditures than the non‐IPM‐FFS farmers. But we do not find any evidence that the IPM‐FFS training program significantly affects yield and the other inputs. There is some evidence indicating that IPM‐FFS farmers may have statistically higher profit levels than non‐IPM‐FFS producers, but these results are sensitive to and may still be invalidated by bias due to unobservable variables. Since IPM‐FFS seem to only significantly reduce insecticide use, policymakers and extension educators may need to adjust the IPM‐FFS curriculum to further emphasize (or include) other agronomic practices that also optimize the use of other inputs like labor, fertilizer, and herbicides. The more efficient use of all inputs would likely reduce total expenditures and eventually translate to higher incomes.     

Do vouchers improve government fertilizer distribution? Evidence from Nigeria

Government distribution of subsidized fertilizer in Sub‐Saharan Africa is often characterized by cumbersome administrative processes and diversion of the product from the proclaimed beneficiaries. This study uses propensity score matching techniques to analyze an input voucher program in Nigeria that was meant to demonstrate an alternative and more efficient distribution mechanism for subsidized fertilizer. We find that participants in the 2009 voucher program received more bags of subsidized fertilizer than nonparticipants and also paid significantly lower prices compared to those who purchased directly from the market. On average, however, participating in the voucher program did not improve the timeliness of fertilizer receipt or the quality of the product. Where statistically significant, participating in the program increased the likelihood that the product was received late and that some complaint about the product's quality was made. As many developing countries; particularly in Sub‐Saharan Africa adopt the use of input vouchers or scale up already existing programs, this study demonstrates when the distribution of subsidized fertilizer via vouchers improves farmers’ timely access to good and more affordable fertilizer. It highlights some key issues to be considered in order to expand the dimensions of success of well‐targeted input voucher programs     

Agricultural commercialization of Karen Hill tribes in northern Thailand

Based on a random sample of 240 farm households in Chiang Mai province, Thailand, this study shows that—contrary to widespread belief—Karen farm households are well-integrated into markets. Average levels of market integration are 31% for gross farm output, 35% for variable inputs, 49% for food consumption, and 80% for net family income. By estimating a two-stage least squares (2SLS) regression model, this study finds that integration into output markets is positively associated with a diversification of land use away from rice monoculture, more intense contact with nearby urban centers, and a greater number of roads connecting the village to the outside world. Controlling for these factors, the distance to urban centers does not impede market integration; distant villages are equally well integrated into output markets. The study further finds that integration into output markets improves farm productivity and net per capita income. Concerns about market integration are discussed. Results have implications for Thai policy makers who have recently placed increasing emphasis on the concept of "sufficiency economy" in order to promote the well-being of rural people.     

Managing phosphorous soil dynamics over space and time

Understanding the relationship between soil fertility dynamics and crop response is conceptually appealing. Even more appealing is comprehension of the spatial and temporal heterogeneity of these connections over a production surface and across seasons. But gaining knowledge about these interactions is difficult because nutrient carryover dynamics and crop response to inputs are determined simultaneously on the one hand, and sequentially on the other. A second problem enters when crops are rotated, for example, the corn [Zea mays (L.) Merr.]–soybean [Glycine max (L.) Merr.] system commonly practiced in the U.S. Corn Belt. This article examines nutrient carryover–crop response dynamics using data from a corn‐soybean, variable rate nitrogen (N), and phosphorous (P) experiment conducted over five years in Minnesota, USA. Site‐specific corn response to N and P and soybean response to P is estimated with a P carryover equation. Estimates are used in a dynamic programming model to determine site‐specific optimal N and P fertilizer policies, soil P evolution, and profitability. The net present value of managing N and P site‐specifically is compared to a strategy in which these inputs are managed uniformly following Extension guidelines. The results suggest that when P carryover is accounted for in determining optimal P fertilizer rates, returns to the variable rate strategies are higher than returns to a uniform or whole‐field management strategy.     

Strategies for sustainable intensification in East African highlands: labor use and input efficiency

Strategies for poverty alleviation and sustainable natural resource management usually focus on land use options for improving yields. Increasing the returns to critical factors requires possibilities for input substitution. Inadequate timing of input applications or nonavailability of complementary factors can seriously hinder this substitution. Such constraints particularly apply in less‐favored areas where soil organic matter content is too low for enabling efficient nutrient uptake and soil structure limits water infiltration and moisture retention. This article focuses attention on the importance of labor for crop management activities and input applications that enhance input efficiency in highland area cropping systems of Northern Ethiopia. Given the inherent complementarities between labor and nutrient supply during critical phases of the plant growth process, input efficiency strongly depends on labor use. We present a semiparametric bioeconomic modeling approach to analyze the available options for improving input efficiency in agricultural production. Input response equations are used that consider the returns per unit of land and labor as a function of specific combinations of material inputs and management practices. Critical trade‐offs may arise when opportunity costs for labor are considered or when complementary factors appear as binding constraints. The model enables assessment of feasible pathways for enhancing sustainable intensification and poverty alleviation in typical settings of the East African highland region.     

Farm productivity in Rwanda: effects of farm size,erosion, and soil conservation investments

This paper examines the effects of farm size, soil erosion, and soil conservation investments on land and labor productivity and allocative efficiency in Rwanda. There were several key results. First, there is a strong inverse relationship between farm size and land productivity, and the opposite for labor productivity. For smaller farms, there is evidence of allocative inefficiency in use of land and labor, probably due to factor market access constraints. Second, farms with greater investment in soil conservation have much better land productivity than average. Those with very eroded soils do much worse than average. Smaller farms are not more eroded than larger farms, but have twice the soil conservation investments. Third, land productivity benefits substantially from perennial cash crops, and the gains to shifting to cash crops are highest for those with low erosion and high use of fertilizer and organic matter. Program and policy effort to encourage and enable farmers to make soil conservation investments, to use fertilizer and organic matter, and to participate in cash cropping of perennials will have big payoffs in productivity. Land markets that allow smaller farmers to buy land could also increase aggregate productivity.     

Stages and determinants of fertilizer use in semiarid African agriculture: the Niger experience

Fertilization is a stepwise decision in Niger. Survey data from a representative sample of 100 households were utilized with individual and joint estimation to evaluate the determinants of fertilizer use at its three different stages: manure alone and two different types of inorganic fertilizer application. The fertilizer price relative to the millet price was always a highly significant determinant of fertilizer adoption. Farmers' experience in seeing the results of fertilization in the field was a principal factor influencing the use of manure and of the micro‐fertilization. Other studies in semiarid regions have emphasized risk, liquidity, or fertilizer responsiveness under harsh conditions but the shift to the micro doses of inorganic fertilizer was statistically associated here with the demonstration trials and the price ratios (fertilizer/millet). A variable reflecting the millet price recovery approximately 6 months after harvest was the most important factor in the decision to raise further inorganic fertilizer use with side dressing. Policy implications were focused on the importance of demonstration trials and improvements in the economic conditions (millet–fertilizer price ratios).     

Evaluating the impact of rising fertilizer prices on crop yields

Because of tensions on fossil energy and phosphorus markets, the rise in fertilizer prices observed during the last decades may continue in the future, putting into question production pathways relying heavily on crop intensification. To evaluate how, in this context, economic choices may alter crop yields, we first construct different fertilizer price scenarios to 2050 based on an econometric relation with oil and gas prices. Other possible scenarios, such as the continuation of historical trends, are also considered. The resulting changes in fertilizer price range between +0.8% and +3.6% per year over the 2005–2050 period. These scenarios are tested in a global land‐use model incorporating an endogenous representation of the land–fertilizer substitution. We find that the supply‐side response to rising fertilizer prices could lower crop yields in 2050 from ?6% to ?13%, with a corresponding increase in global cropland area ranging between 100 and 240 Mha if the demand for food and nonfood products has to be met. The sensitivity of these results is tested with regard to assumptions on food consumption, change in potential yield and nutrient use efficiency.