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Risk and nitrogen use on rainfed rice: Bicol, Philippines

Abstract

Year to year variability in nitrogen response is widely believed to be responsible for low levels of fertilizer application by risk averse farmers. Certain authors have claimed that production risk is not responsible for sub-optimal applications of fertilizer. Since these studies estimated fertilizer response in irrigated areas or in simulated rainfed areas in experiment stations they may have underestimated the degree of risk faced by the majority of farmers.

This study seeks to address this issue of risk under farmers' conditions by using data from rainfed farmers fields in a risky rice growing area of the Philippines.

Long term distributions of factors responsible for temporal variability in N-response, such as moisture stress and typhoons, are derived by using a rainfall simulator and a water balance model. These distributions are combined with a hetereoscedastic nitrogen response function to simulate long term yield distributions at different N-rates. The application of risk averse and risk neutral decision making models shows that risk aversion reduces fertilizer application by only 7–9%. These results occur because as N-rates increase, the benefits from increased average profits outweigh the disadvantages of increased variability in profits. These findings provide additional evidence to support the emerging consensus that the impact of risk aversion on fertilizer use is much smaller than previously believed.

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Smith, J., Umali, G., Rosegrant, M.W. et al. Risk and nitrogen use on rainfed rice: Bicol, Philippines. Fertilizer Research 21, 113–123 (1989). https://doi.org/10.1007/BF01080536

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Key words

  • Nitrogen use
  • farmer risk aversion
  • rice
  • Asia