Determination of risk efficient crop combinations for smallholder conservation farmers: An application of the target MOTAD analysis

Abstract

Conservation farming practicing households like all other small holder farmers in general confront yield and price variability in addition to many other resource constraints. Little is known however about the effects of risks associated with fluctuating crop yields and input or output prices and their effect on the optimal crop enterprise combination. This identifies the need to comprehensively account for risk and its implications for efficient resource allocation, enterprise selection and combination. Thus the study aims to determine risk-efficient enterprise combinations for a representative smallholder conservation farmer in the Southern Province of Zambia who is employing ripping as the main tillage method. The Target MOTAD formulation was used to generate and observe risk efficient farm plans and from the results the different risk levels associated with the plans where observed. The profit maximizing risk and risk efficient enterprises were determined. The risk-efficient farm plans aimed to maximize net returns over variable costs while minimizing the probability of the returns falling below a desired level of income. The results obtained from the model suggested that risk-efficient enterprise combination for a representative smallholder farm household would include maize, groundnuts and soya beans. The other crop under study (cotton) did not enter the model solution. The findings further suggest that for a profit maximizing farm plan 0.663 hectares of maize and 1.737 hectares of Groundnuts should be cultivated. For the risk efficient farm plans, the results suggested allocafion of more land to groundnut and soya beans and maize production as the expected shortfall in income (X) increased from 0 to 25 ZMK below the desired target income of 3.300 ZMK. The choice of a respective risk efficient crop combination or farm plan is dependent on a farm households risk preference. For risk averse farmers the more likely option is the plan with minimum variance (plan 1) while risk preferring households will choose the high income plan which is associated with higher risk plan (5). Therefore, in order to improve the efficiency with which available agricultural resources are allocated among different competing enterprises on a farm, smallholder farmers in southern province should be encouraged through the existing extension system to combine maize, soya beans and groundnuts as this enterprise combination is risk efficient.