Strategic value of crop diversification among farmers: New insights and measurement

Abstract

Previous literature has mostly used crop diversification indices to quantify the extent of crop diversification used by farmers. Indices are useful in assessing the number and proportion of crops in a farmer's portfolio. However, they often overlook the heterogeneity of the crops in their diversification strategy. Consequently, our comprehension of crop choice decisions and their potential to identify optimal diversification strategies is limited. This study introduces the enterprise structure (ES) approach for characterizing crop diversification to account for differences in the types of crops in a portfolio. Using nationally representative survey data from Zambia, we identified 33 ESs that were adopted by at least 30 households in the study area. We examined the effect of these 33 ESs on profitability and crop revenues, using a semi-log model. Our results reveal that ESs do affect profitability and revenue. The effect is different in each agroecological zone based on the crops contained in the ESs. That is, ESs with the same number but different types of crops may present different profitability and revenues. Particularly, Cassava ES significantly increased gross margin per hectare (GM_ha) by 77.89% compared to Maize ES, in agroecological zone III. Further, the results suggest that ESs with more crops may not be necessarily more or less superior to specialization. Based on the ES approach, clear recommendations on what crops can be included in a portfolio to increase profitability are provided.