Crop portfolio choice and climatic risk
Source: Flickr, CIAT
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Sixty percent of India’s farmland is rain-fed and dependent on the monsoon and therefore at risk of rainfall irregularities. This is significant as variability in rainfall can have an adverse impact on agricultural output and income and thus food security. A recent paper in Global Food Security investigates food crop portfolio choice as a risk management strategy to climatic risk (rainfall variability) among farmers in the semi-arid tropics of India.

This study is based on farm and household-level panel data from 2008 to 2012 collected by the International Crop Research Institute for Semi-Arid Tropics (ICRISAT) from 18 different villages across five states (Andhra Pradesh, Madhya Pradesh, Maharashtra, Gujarat and Karnataka) in the semi-arid tropical region of India. This data provides relevant information on production, price, markets, climate and socioeconomic aspects. This data is further complimented by district level annual and season rainfall data from 1966 to the present taken from ICRISAT data sets. The study measures climate variability through calculating mean and standard deviations of rainfall in the selected districts. Through a series of equations, the study estimates the effect of climatic risk on household food crop portfolio riskiness using pooled ordinary least squares, random-effects estimators and correlated random effects estimators.

The main crops produced in the study area are cereals (rice, wheat, maize and sorghum), pulses (lentils, cowpea, beans, peas, etc), legumes, cash crops, oilseeds, and vegetables. The study uses a single-index model to compute the riskiness of each crop in the study. Crops including sorghum and pulses (finger millets, horse gram, and pearl millets) are considered the safest crops while others including rice, wheat, cotton, sugar cane, soybean, chickpea, and groundnut are considered moderately riskier while fruits and chillies are considered the riskiest crops. It is important to note that farmers generally grow multiple crops, as such, a farming household’s food crop portfolio is calculated as the average risk value for each of the crops grown in the household. 

The study finds that farming households that generally face the largest climatic risk (rainfall variability) grew the safest food crop portfolios suggesting that Indian households that are subjected to higher climatic risks seek a safe combination of food crops (such as sorghum and pulses). Similarly, as farmers face less climatic risk they tend to grow riskier crops (such as sugarcane, chillies and fruits). The study also finds that farmers that adopt safer combinations of crop portfolios generally have lower farm income levels than those that have riskier crop portfolios. Practices such as mixed cropping, intercropping and sequential cropping systems were found to be particularly dominant amongst households that experience the largest climatic risk. The paper highlights that this is significant as it allows farmers to protect against risks and to take advantages of complementarities and linkages between crops. Another interesting finding from this study is the role of off-farm income in food crop portfolio choices. The study finds that higher levels of total off-farm income increases the likelihood of choosing relatively riskier food crop portfolios. Similarly, findings show an increase in choice of riskier food crop portfolio choices among smallholders with higher values of livestock holdings.

Several other factors are found to be significant in explaining riskiness in food crop portfolio choices in the presence of climatic risk. For example, a female-headed household is more likely to choose a less risky food crop portfolio. Similarly, farmers who operate under subsistence conditions tend to be the most risk-averse. Conversely, larger households (which tend to have more farm labour and off-farm income) are more likely to choose risky food crop portfolios.

In conclusion, the paper highlights that it is likely that this strategy of growing safe crops (such as sorghum and pulses) is undertaken to maintain a subsistence level of food availability in extreme climatic conditions. This choice of growing safe crops suggests that Indian farmers facing climatic risk need income-supporting activities to enhance their ability to take risk and achieve better returns from farming (maximizing income) which in turn would support improvements in their food security. Based on this, the paper suggests that agricultural policies should be linked to climate adaptation policies. For instance, policies that promote smallholder access to weather insurance products are likely to increase their ability to take risks. Similarly, the paper highlights that additional investments in extension services, infrastructure and off-farm jobs can help support the ability of farming households to bear climatic risks.

By Bas Paris

Photo credit:Flickr, CIAT