Managing drought risks with drought-stress tolerant rice varieties and its impacts on yield and production risk: A case of Nepal

Abstract

Managing drought risk is one of the most critical issues for rice farmers as its production requires a large amount of water compared to other crops. Drought-stress tolerant rice varieties (DSTRV) are thus important to minimize production loss and yield variability. Therefore, this study empirically examines the impact of DSTRV on rice yield and downside production risk. For the empirical analyses, this study uses data from 1,576 rice plots operated by 631 farm households in the Terai region of Nepal. To examine the impact of DSTRV on rice yield, an endogenous switching regression model is applied, while for assessing production risk, we applied a flexible moment-based specification of a stochastic production function. Results show that 80% of the farm households in the study area mentioned drought as the major climate risk, and about 31.35% of the sampled farmers used DSTRV in their farms. The average yield difference between the adopter and non-adopters of DSTRV is about 22.84%, and the downside production risk (i.e., the probability of crop failure) among adopters is reduced by almost 80%. Furthermore, if the non-adopters had adopted the DSTRV, they would have increased their rice yield by 20% and reduced the downside production risks by 47.4%. With these benefits, there is an enormous scope to upscale the adoption of DSTRV in Nepal as an ex-ante adaptation measure to drought risk in rice farming. Proper dissemination of such varieties and enhancing farmers’ knowledge and capacity to apply such measures are crucial steps to minimize the risks of loss due to drought.