Cotton production under risk: a simultaneous adoption of risk coping tools

Abstract

Agricultural production explicitly involves dealing with multiple risks, often simultaneously, and applying risk management strategies contemporaneously. However, farmers’ behavior of concurrent adoption of multiple risk management tools was ignored in previous studies and formed the rationale for this research. This study was designed to assess the effect of socioeconomic factors, farmers’ risk perceptions, the production management technologies, and access to information and credit on the adoption of price, climate, biological, and financial risk management strategies. The potential for simultaneous adoption of these strategies was also hypothesized and evaluated. Allowing for prospective correlation between the risk management strategies, a multivariate probit model was used on 302 randomly selected cotton farmers from Punjab province of Pakistan using multistage random sampling. The research findings established the simultaneous adoption of the four risk management strategies and that the adoption of one strategy encourages the farmer to adopt other strategy(ies). Significant factors in the adoption of various risk management strategies were found to be education, farming experience, land ownership, farmers’ risk perceptions, the production management technologies, information access and credit access. The improvements in information access through quality extension services from the government and provision of alternative risk management options, including Crop Loan Insurance Scheme, are crucial to assist farmers in managing risks at farm level.