Economic Sustainability and Multiple Risk Management Strategies: Examining Interlinked Decisions of Small American Farms

Sudip Adhikari,Aditya R Khanal

doi:10.3390/su13041741

Sudip Adhikari, Aditya R Khanal

Open Access

https://doi.org/10.3390/su13041741

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Journal: Sustainability	Publication Date: Feb 5, 2021
Citations: 6	License type: CC BY 4.0

Affiliation: Tennessee State University

Abstract

Economic viability of small farms and farming businesses depends on multiple factors. These farms have limited production and financial resources to maintain their operation. Therefore, to sustain farming, adopting appropriate risk management strategies is a pivotal decision for small farmers. We surveyed Tennessee’s small farms and utilized multivariate probit models to study factors influencing the adoption of various risk management strategies. Our findings suggest that the decisions related to the adoption of risk management strategies are significantly interlinked. Along with factors representing the operator’s age, education, and farm operator’s income and land holdings, we also found that the government incentives (payments), smartphones, and farmers’ continuation plan significantly influence the strategic decisions of adopting risk management strategies.

Highlights

IntroductionDue to its inherent link with natural and environmental conditions beyond control, sometimes farmers are exposed to harsh conditions hindering regular plans and even total failure of the farm operation [1]
A significant likelihood ratio test result rejects the null hypothesis of no correlation between four risk management strategies (RMS) under study. This indicates that a multivariate probit model choice accounting for correlated decisions is an appropriate method instead of independent probit
Our results suggest that crop or livestock diversification (CLD) and Alternative Farm enterprises (AFE) have a significant positive relationship

Summary

Introduction

Due to its inherent link with natural and environmental conditions beyond control, sometimes farmers are exposed to harsh conditions hindering regular plans and even total failure of the farm operation [1]. Small farms are challenged continuously by the overall risk of sustaining farm operation as a viable farm business. In the U.S, small family farms, farms generating annual gross cash farm income less than USD 350,000, account for around 88% of the total number of farms. These small family farms contribute approximately 21.5% of the U.S.’s overall yearly agricultural sales [4]. Small farms play a crucial role in sustaining rural areas’

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