Skip to main content

Advertisement

SpringerLink
Log in

Simultaneous adoption of contract farming and off-farm diversification for managing agricultural risks: the case of flue-cured Virginia tobacco in Pakistan

  • Original Paper
  • Published:
Natural Hazards Aims and scope Submit manuscript

Abstract

Tobacco crop is of high economic significance for Pakistan in terms of valuable foreign exchange and being a high-value cash crop. However, changes in tobacco prices, input costs, effects of new tobacco law on producers and varying in economic conditions of the country have emerged as risk elements for tobacco production. This study was, therefore, designed to identify different risks that farmers encounter during the tobacco cultivation in Pakistan and to generate ideas for managing these risks. Various factors affecting farmers’ decision for simultaneous adoption of contract farming and off-farm diversification were analyzed in present research using bivariate and multinomial probit model. The data were obtained from April to September 2015 in selected districts of Khyber Pakhtunkhwa, Pakistan (that accounts for more than 94% of the total flue-cured tobacco production). The results suggest that socioeconomic and demographic characteristics of tobacco growers significantly affect the adoption of risk management tools. Similarly, farmers risk perception of flood, heavy rains and hailstorms, heavy winds, pest and diseases, fire in curing furnaces, drought and risk attitude of farmers are important factors that affect the utilization of agricultural risk management tools. The findings of the current study will help in better understanding farmers’ behavior under risk and as a guideline for policy makers to anticipate different risk sources related to the tobacco crop.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

References

  • Ali S, Altaf Q, Farooq U (2014) Acreage response of flue cured Virginia tobacco in Khyber Pakhtunkhwa. Pak J Agric Res 27(3):217–225

    Google Scholar 

  • Arrow KJ (1964) The role of securities in the optimal allocation of risk-bearing. Rev Econ Stud 31(2):91–96

    Article  Google Scholar 

  • Ashfaq M, Hassan S, Naseer MZ, Baig IA, Asma J (2008) Factors affecting farm diversification in rice-wheat. Pak J Agric Sci 45(3):91–94

    Google Scholar 

  • Ayinde OE (2008) Effect of socio-economic factors on risk behaviour of farming households: an empirical evidence of small-scale crop producers in Kwara State, Nigeria. Agric J 3(6):447–453

    Google Scholar 

  • Baumann P (2000) Equity and efficiency in contract farming schemes: the experience of agricultural tree crops. Overseas Development Institute, London

    Google Scholar 

  • Binici T, Koc AA, Zulauf CR, Bayaner A (2003) Risk attitudes of farmers in terms of risk aversion: a case study of lower Seyhan plain farmers in Adana province, Turkey. Turk J Agric For 27(5):305–312

    Google Scholar 

  • Cahyadi ER, Waibel H (2013) Is contract farming in the Indonesian oil palm industry pro-poor? J Southeast Asian Econ (JSEAE) 30(1):62–76

    Google Scholar 

  • Cohen A, Einav L (2007) Estimating risk preferences from deductible choice. Am Econ Rev 97(3):745–788

    Article  Google Scholar 

  • Cooper DF, Grey S, Raymond G, Walker P (2005) Project risk management guidelines. Wiley, Hoboken

    Google Scholar 

  • Covey TD (1985) Analysis of the rough rice futures contract. Agricultural economics research report/Mississippi Agricultural and Forestry Experiment Station (USA)

  • Dadzie SKN, Acquah H (2012) Attitude toward risk and coping responses: the case of food crop farmers at Agona Duakwa in Agona East District of Ghana. Int J Agric For 2(2):29–37

    Google Scholar 

  • Davis T, Patrick G, Coble K, Knight T, Baquet A (2005) Forward pricing behavior of corn and soybean producers. J Agric Appl Econ 37(1):145-160

    Article  Google Scholar 

  • Deressa TT, Ringler C, Hassan RM (2010) Factors affecting the choices of coping strategies for climate extremes. Citeseer, Princeton

    Google Scholar 

  • Drollette SA (2009) Managing Production Risk in Agriculture. Department of Applied Economics Utah State University. AG/ECON/2009‐03RM

  • Eaton C, Shepherd A (2001) Contract farming: partnerships for growth. In: FAO Agricultural Services Bulletin No. 145. Food and Agriculture Organisation, Rome

  • Fawole P, Thomas KA, Okoruwa VO (2011) Effects of contract farming scheme on cassava production enterprise in Oyo state, Nigeria. J Rural Econ Dev 20(1):1–7. http://ageconsearch.umn.edu/bitstream/206867/2/Pippy.pdf

    Google Scholar 

  • Government of Pakistan (2009) Crop area and production by Districts (1981-82-2008-09): Food and cash Crops. Government of Pakistan, Statistic Division, Economic Wing Fedearal Bureau of statistics

  • Haque T (2000) Contractual arrangements in land and labour markets in rural India. Indian J Agric Econ 55(3):233

    Google Scholar 

  • Hardaker JB, Huirne RB, Anderson JR, Lien G (2004) Coping with risk in agriculture. CABI publishing, Wallingford

    Book  Google Scholar 

  • Harrison GW, Lau MI, Rutström EE (2007) Estimating risk attitudes in Denmark: a field experiment. Scand J Econ 109(2):341–368

    Article  Google Scholar 

  • Harwood JL, Heifner R, Coble K, Perry J, Somwaru A (1999) Managing risk in farming: concepts, research, and analysis. US Department of Agriculture, Economic Research Service

  • Hope J, Lingard J (1992) The Influence of Risk Aversion on the Uptake of Set-Aside: a MOTAD and CRP Approach. J Agric Econ 43(3):401–411

    Article  Google Scholar 

  • Hussain A, Thapa GB (2012) Smallholders’ access to agricultural credit in Pakistan. Food Secur 4(1):73–85

    Article  Google Scholar 

  • Kammar SK, Bhagat R (2009) Constraints experienced by farmers in adopting risk and uncertainty management strategies in rainfed agriculture. Pusa Agri Sci 32:70–74

    Google Scholar 

  • Kisaka-Lwayo M, Obi A (2012) Risk perceptions and management strategies by smallholder farmers in KwaZulu-Natal Province, South Africa. Int J Agric Manag 1(3):28–39

    Google Scholar 

  • Kouame E (2010) Risk, risk aversion and choice of risk management strategies by cocoa farmers in western Cote D. Ivoire’, University of Cocody–AERC Collaborative Ph.D. Program, Abidjan

  • Lansdowne ZF (1999) Risk matrix: an approach for prioritizing risks and tracking risk mitigation progress. In: Proceedings of the 30th Annual Project Management Institute, Philadelphia, PA, October 10–16

  • Lucas MP, Pabuayon IM (2011) Risk Perceptions, Attitudes, and Influential Factors of Rainfed Lowland Rice Farmers in Ilocos Norte, Philippines. Asian J Agric Dev 8(2):61–77

    Google Scholar 

  • Makus LD, Lin BH, Carlson J, Krebill-Prather R (1990) Factors influencing farm level use of futures and options in commodity marketing. Agribusiness 6(6):621–631

    Article  Google Scholar 

  • Martinez SW (2002) Vertical coordination of marketing systems: lessons from the poultry, egg, and pork industries. ERS, USDA, AER 807

  • Matsumoto T, Kijima Y, Yamano T (2006) The role of local nonfarm activities and migration in reducing poverty: evidence from Ethiopia, Kenya, and Uganda. Agric Econ 35(s3):449–458

    Article  Google Scholar 

  • Mishra A, El-Osta H (2002) Risk management through enterprise diversification: a farm-level analysis. AAEA annual meeting, Long Beach, CA

  • Mishra AK, El-Osta HS, Sandretto CL (2004) Factors affecting farm enterprise diversification. Agric Finance Rev 64(2):151–166

    Article  Google Scholar 

  • Moschini G, Hennessy DA (1999) Uncertainty, risk aversion and risk management for agricultural producers. Economic Staff Paper Series. Paper 315. http://lib.dr.iastate.edu/econ_las_staffpapers/315

  • Olarinde L, Manyong V, Akintola J (2007) Attitudes towards risk among maize farmers in the dry savanna zone of Nigeria: some prospective policies for improving food production. Afr J Agric Res 2(8):399–408

    Google Scholar 

  • Ortmann GF, Patrick GF, Musser WN, Doster DH (1992) Sources and Management of Risk: evidence From Leading Cornbelt Farmers In The USA. Agrekon 31(4):216–221

    Article  Google Scholar 

  • Picazo-Tadeo AJ, Wall A (2011) Production risk, risk aversion and the determination of risk attitudes among Spanish rice producers. Agric Econ 42(4):451–464

    Article  Google Scholar 

  • Poon K, Weersink A (2011) Factors affecting variability in farm and off-farm income. Agric Finance Rev 71(3):379–397

    Article  Google Scholar 

  • Pratt JW (1964). Risk aversion in the small and in the large. Econom 32(1/2):122–136

    Article  Google Scholar 

  • Rehima M, Belay K, Dawit A, Rashid S (2013) Factors affecting farmers’ crops diversification: evidence from SNNPR, Ethiopia. Int J Agric Sci 3(6):558–565

    Google Scholar 

  • Saqib ES, Ahmad MM, Panezai S, Ali U (2016) Factors influencing farmers’ adoption of agricultural credit as a risk management strategy: the case of Pakistan. Int J Disaster Risk Reduct 17:67–76

    Article  Google Scholar 

  • Sherrick BJ, Barry PJ, Ellinger PN, Schnitkey GD (2004) Factors influencing farmers’ crop insurance decisions. Am J Agric Econ 86(1):103–114

    Article  Google Scholar 

  • Singh G (2010) Crop Insurance in India. Working paper no. 2010-06-01. Indian Institute of Management, Vastrapur

  • Singla S, Sagar M (2012) Integrated risk management in agriculture: an inductive research. J Risk Finance 13(3):199–214

    Article  Google Scholar 

  • Tanaka T, Camerer CF, Nguyen Q (2010) Risk and time preferences: linking experimental and household survey data from vietnam. Am Econ Rev 100(1):557–571

    Article  Google Scholar 

  • Tavernier EM, Onyango BM (2008) Utilization of farm management risk strategies at the rural/urban fringe. Afr J Agric Res 3(8):554–565

    Google Scholar 

  • Ullah R, Shivakoti GP (2014) Adoption of on-farm and off-farm diversification to manage agricultural risks: are these decisions correlated? Outlook on Agric 43(4):265–271

    Article  Google Scholar 

  • Ullah R, Shivakoti GP, Rehman M, Kamran MA (2015a) Catastrophic risks management at farm: the use of diversification, precautionary savings and agricultural credit. Pak J Agric Sci 52(4):1139–1147

    Google Scholar 

  • Ullah R, Jourdain D, Shivakoti GP, Dhakal S (2015b) Managing catastrophic risks in agriculture: simultaneous adoption of diversification and precautionary savings. Int J Disaster Risk Reduct 12:268–277

    Article  Google Scholar 

  • Ullah R, Shivakoti GP, Kamran A, Zulfiqar F (2016a). Farmers versus nature: managing disaster risks at farm level. Natural Hazards, 82(3):1931–1945

  • Ullah R, Shivakoti GP, Zulfiqar F, Kamran MA (2016b) Farm risks and uncertainties Sources, impacts and management. Outlook on Agric 45(3):199–205

    Article  Google Scholar 

  • Velandia M, Rejesus RM, Knight TO, Sherrick BJ (2009) Factors affecting farmers’ utilization of agricultural risk management tools: the case of crop insurance, forward contracting, and spreading sales. J Agric Appl Econ 41(01):107–123

    Article  Google Scholar 

  • Wainaina PW, Okello JJ, Nzuma J (2012) Impact of contract farming on smallholder poultry farmers’ income in Kenya. Selected Paper prepared for presentation at the International Association of Agricultural Economists (IAAE) Triennial Conference, Foz do Iguau, Brazil

  • Wang JX, Roush ML (2000) What every engineer should know about risk engineering and management. CRC Press, Boca Rotan

    Google Scholar 

  • Yamane T (1967) Statistics: an introductory analysis, 2nd edn. Evanston & London and John Weather Hill Inc, Tokyo

    Google Scholar 

  • Zeller M, Diagne A, Mataya C (1998) Market access by smallholder farmers in Malawi: implications for technology adoption, agricultural productivity and crop income. Agric Econ 19(1):219–229

    Article  Google Scholar 

  • Zulfiqar F, Ullah R, Abid M, Hussain A (2016) Cotton production under risk: a simultaneous adoption of risk coping tools. Nat Hazards 84(2):959–974

    Article  Google Scholar 

Download references

Author information

Author notes

    Authors and Affiliations

    1. Department of Agricultural Economics and Management, Zhejiang University, Hangzhou, 310029, China

      Wencong Lu & Abdul Latif

    2. Department of Management Sciences, Abbottabad University of Science and Technology, Abbottabad, Khyber Pakhtunkhwa, Pakistan

      Abdul Latif

    3. Institute of Agricultural and Resource Economics, University of Agriculture, Faisalabad, Pakistan

      Raza Ullah

    Authors
    1. Wencong Lu
      View author publications

      You can also search for this author in PubMed Google Scholar

    2. Abdul Latif
      View author publications

      You can also search for this author in PubMed Google Scholar

    3. Raza Ullah
      View author publications

      You can also search for this author in PubMed Google Scholar

    Corresponding author

    Correspondence to Abdul Latif.

    Additional information

    Wencong Lu and Abdul Latif have contributed equally to this work.

    Rights and permissions

    Reprints and permissions

    About this article

    Check for updates. Verify currency and authenticity via CrossMark

    Cite this article

    Lu, W., Latif, A. & Ullah, R. Simultaneous adoption of contract farming and off-farm diversification for managing agricultural risks: the case of flue-cured Virginia tobacco in Pakistan. Nat Hazards 86, 1347–1361 (2017). https://doi.org/10.1007/s11069-017-2748-z

    Download citation

    • Received:

    • Accepted:

    • Published:

    • Issue Date:

    • DOI: https://doi.org/10.1007/s11069-017-2748-z

    Keywords

    Search

    Navigation