| Agricultural activities are subjected to a wide range of risks because of variable economic and biophysical environment in which farming operates.The uncertainties and risks in agriculture are diverse in nature ranging from events related to weather conditions and animal diseases;changes in agricultural product prices to fertilizer and other inputs;and from financial uncertainties in policy and regulatory risks.The existence of risk in agriculture has long been observed as having a significant influence on farmers,production and investment decisions.There are various sources of risk associated with farm enterprise,including price/market risk,biological risk,climate risk,and financial risk.It is important for farmers to recognize and manage risks.Farmers have a number of risk management strategies(contract farming,off-farm diversification,agricultural credit,saving etc.)to manage risk at farm level and many of them utilize these strategies simultaneously.However,previous studies have ignored the potential correlation between the risk management adoption decisions and assume that these decisions are independent of each other.Keeping in view the correlation of the risk management adoption decisions and the potential for concurrent adoption of these risk management tools.Therefore,the present study is designed to investigate the impact of various factors on farmer's risk management adoption decisions using probit,bivariate,multivariate and multinomial probit approaches.For this study,4 districts from two divisions of Punjab province of Pakistan were selected using a multistage random sampling technique and 400 maize farmers were randomly selected for an interview during the period of September-December 2016.Three risk management strategies,namely contract farming,off-farm diversification and agricultural credit are considered for the study.The impact of socio-economic and demographic characteristics of farming household,farmers' perception of major risk sources(Price risk,Climate risk,Biological risk and Financial risk)and farmers' risk attitude were investigated on their decisions to adopt the three risk management strategies.In addition,the productivity and efficiency of maize farms were also assessed.Farmers' responses on the occurrence and severity of the major risk sources(on a Likert scale)were combined in a risk matrix to figure out farmers' perceptions of the risk sources.A cubic utility function was used to find the farmers' attitude towards risk.The shape of the utility function on an ordinal scale was transformed into a quantitative measure of risk aversion using Arrow-Pratt absolute risk aversion coefficient.By using non-parametric approach,the technical,allocative and economic efficiency of maize farms was also measured.Further the results regarding factors influencing hybrid maize farmers' risk attitude and their perception revealed that the majority of farmers were risk averse(78%)in nature and perceive price(79%),biological(72%)and climate(69%)to be potential sources of risks to their farm enterprise.In addition,Probit model analysis divulged that distance from farm to the main market,off-farm income,location dummies for Sahiwal and Okara,respondent age,maize farming experience,access to the extension agent significantly(either negatively or positively)influence farmers' risk attitude and risk perceptions.Moreover,numerous aspects influence farmer's choice for the adoption of off-farm diversification and contract farming simultaneously and were analyzed using bivariate and multinomial probit models.Findings express a strong relationship between the adoption decision of two risk coping instruments(82%).Furthermore,results divulge that the socioeconomic attributes(age,education,farming experience,maize farm size,distance to main market and regional disparities)of hybrid maize farmers significantly affect the adoption of risk coping tools.Likewise,the farmers risk perceptions regarding climate risk,price risk,biological risk and financial risk and risk behavior of farmers are notable determinants that influence the utilization of risk coping strategies in maize enterprise.Furthermore,attempts were made to examine the factors affecting the concurrent adoption of off-farm income diversification(49%)and agricultural credit(41%)which the farmers use to manage the risk to maize production.By applying bivariate and multinomial probit approaches,results revealed that strong correlations exist between the off-farm income diversification and agricultural credit which indicates that the use of one risk management strategy leads to another.The findings also demonstrated that education,livestock number,maize farming experience,perceptions of biological risks and risk averse nature of the growers significantly encourage the adoption of diversification as a risk management tool while farm size inversely affects the adoption of diversification.Similarly,in the adoption equation of credit,maize farming experience,farm size,perceptions of price and biological risks and risk attitude of farmers significantly enhance the chances of adopting agricultural credit to manage risks.In addition,Multivariate probit model was used to evaluate the impacts of explanatory variables on farmers' choices of adopting contract farming(61%),off-farm income diversification(49%)and agriculture credit(41%)to manage risk,keeping in view the potential for concurrent adoption of these risk management strategies.The findings recommend that the decisions of adopting risk management strategies are interlinked and at the same time the adoption of one risk management tool encourage farmers to adopt another risk management strategy(ies).Besides,the farm and farm household characteristics age,farming experience,education,the proportion of maize land,risk perceptions and risk attitude played an imperative role in farmers' decision making related to different risk management tools.As expected,a higher risk perception relating to the source of risk encouraged fanners to adopt relevant risk management tools.Additionally,the productivity and efficiency of maize farm were assessed by estimating technical,allocative and economic efficiencies using data envelopment analysis technique.The mean technical,allocative and economic efficiency scores for maize farms were 0.89,0.66 and 0.59 respectively.Further,tobit regression results revealed highly significant for all three efficiencies.Thus,findings divulge that farm size,the age of farm household,maize fanning experience,the area under maize crop,distance from farm to the main market,number of visits of extension workers,credit access and Okara district were the significant factors for technical efficiency.In addition,a number of visits of extension workers,districts(Sahiwal and Okara)for allocative efficiency.Whereas,the age of farmers,maize farming experience and regional disparity(Sahiwal district)had a substantial influence on economic efficiency for the hybrid maize farams respectively.In the analysis of risk management choices,using Individual probit,bivariate,multivariate and multinomial probit approaches provides richer interpretations,better inferences,and more information that may further improve understanding of the risk management decisions of farmers.This will help policy maker to anticipate that which type of farmers will adopt government supported risk management tools in the presence of conventional tools for risk management.Based on the information from the multivariate and multinomial probit approaches the agricultural extension educators can also improve their programs to guide the farmers in a better way.Resultantly maize production and efficiency will also increase by using optimal level of resources for maize farmers.Hence,agricultural policies must be reviewed to maximize productivity and efficiency.On the basis of findings of the overall study,it is recommended that ?)farmers'understanding of the crop loan insurance scheme,launched by the government,should be improved using better extension services and the use of other information sources,including radio,TV and newspaper etc.?)Farmers' access to information sources should be the key element in agricultural policies specially those who target agricultural risks.?)The government should pay attention to enhance farmers' access to credit by simplifying and shortening the credit processing period and procedure considerably.?)The financial institutions need to accept both landholdings and livestock/crops as collateral for advancing loans to enhance farmers' access to institutional credit.?)Agriculture departments should also arrange training programs for farmers,guiding them through the process of obtaining a loan from institutional sources and encourage the positive use of the credit.?)It is suggested that priority should be given to improving the efficiency of the maize farms by introducing technical training programs for the farmer and by promoting agriculture extension services. |
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