Finding the optimal crop portfolio for sustainability farming

Abstract

Activities in the agricultural sector are always faced with risk and uncertainty. The problem of uncertainty is also experienced by vegetable farmers in Marelan District. Generally, farmers in Marelan cultivate long beans, spinach, and mustard. One alternative that can be done by farmers to minimize the impact of risk is by doing diversification. Moreover, diversification also supports the sustainability of agriculture. Diversification farming can be done by combining two or more crops in one area of cultivated land. This combination is also referred to as a crop farming portfolio. The optimal portfolio selection will be affected by the return and risk of the portfolio and farmers’ risk preferences. The result showed that the optimal portfolio in neutral preference is the portfolio II, spinach farming in monoculture. When risk preference changes from risk averse to very risk averse, the optimal portfolio is portfolio VI, the combination of spinach and mustard. The results of this research can be used by farmers as a reference in selecting the best portfolio and a reference for the government in making policies related to vegetable farming so that vegetable farming in the Marelan district could become sustainable farming and have a good impact to the environment.