Puneet Vatsa, Hongyun Zheng and Wanglin Ma
We analyzed the effects of different combinations of organic soil amendments (OSAs) and chemical fertilizers on agrifood production, focusing on banana yields in China, the…
Abstract
Purpose
We analyzed the effects of different combinations of organic soil amendments (OSAs) and chemical fertilizers on agrifood production, focusing on banana yields in China, the second-largest producer of bananas globally.
Design/methodology/approach
We computed these combinations by dividing the expenditures on OSAs by those on chemical fertilizers and called them OSA-CF ratios. First, we classified farmers based on quintiles of expenditures on chemical fertilizers. Then, we studied the association between OSA-CF ratios and banana yields for each quintile. We also considered an alternate specification in which farmers were grouped along the OSA-CF ratio continuum. The first group comprised farmers not using OSAs. Their OSA-CF ratio was zero. Farmers applying low, medium, and high OSA-CF ratios constituted groups two, three, and four; the groups were delineated based on the OSA-CF ratio tertiles, and the associations between tertiles of OSA-CF ratios and banana yields for each quintile were analyzed. The data used in this study were collected by surveying 616 households in three major banana-producing provinces (Guangdong, Hainan, and Yunnan) of China. Standard linear regressions and the two-stage predictor substitution method were employed to complete the analysis.
Findings
There were variations in the effects of OSA-CF ratios on banana yields obtained by farmers iifferent quintiles. For the first and second quintiles, low, medium, and high OSA-CF ratios improved banana yields relative to not using OSAs. For farmers in the first quintile using only chemical fertilizers, applying a low OSA-CF ratio was associated with an improvement of 792 kg/mu in banana yields. For their counterparts in the second quintile, the same transition was associated with a gain of 534 kg/mu. For the fifth quintile, comprising farmers spending 320 yuan/mu or more on chemical fertilizers, applying a high OSA-CF ratio instead of using only chemical fertilizers was associated with a 401 kg/mu decline in banana yields. Even so, for this group, no differences were observed between the yields of farmers not applying OSAs and those using low and medium OSA-CF ratios.
Practical implications
Banana farmers in southern China, using only chemical fertilizers, can improve yields by combining them with OSAs if their chemical fertilizer expenditures are less than 66.67 yuan/mu. Those using only chemical fertilizers and spending between 68 yuan/mu and 300 yuan/mu on them can maintain yields by applying OSAs in conjunction with chemical fertilizers. However, yields may decline for farmers using only chemical fertilizers and spending 320 yuan/mu or more on them if they incorporate OSAs such that the OSA-CF ratio reaches 0.78 or higher. Overall, combining OSAs with chemical fertilizers can improve yields while attenuating the adverse effects of chemical fertilizers on the environment. Policymakers should inform farmers of these benefits and accelerate the transition to sustainable agriculture through educational and awareness programs.
Originality/value
Farmers apply OSAs such as organic fertilizers and farmyard manure to adjust and remedy soil nutrition to improve farm productivity. However, little is known about how combining OSAs with chemical fertilizers affects banana yields. This study provided the first attempt to explore the associations between OSA-CF ratios and banana yields using cross-sectional data on farming households.
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Tao Ye, Ming Wang, Wuyang Hu, Yangbin Liu and Peijun Shi
Understanding farmers’ preferences for crop insurance attributes is crucial in designing better insurance products and guiding government policies but such research is lacking…
Abstract
Purpose
Understanding farmers’ preferences for crop insurance attributes is crucial in designing better insurance products and guiding government policies but such research is lacking, particularly in developing countries. The paper aims to discuss these issues.
Design/methodology/approach
This study uses a survey featuring a discrete choice experiment and policy simulation.
Findings
Overall, crop insurance has positive values to farmers, although preference is heterogeneous based on socioeconomic characteristics and risk position. Policy simulation confirms the roles of liability in strengthening insurance participants’ welfare and premium subsidy in encouraging participation. Introducing one more product into the market can accommodate farmers’ diverse needs and lead to increases in both aggregated social welfare and participation while maintaining the current level of government expense in subsidy – a potential Pareto improvement.
Research limitations/implications
Methodology employed is not the most novel in the choice experiment literature as many of the advances in choice experiment design could not be applied due to the actual condition in rural China and Chinese farmers’ capability in understanding the experiment.
Practical implications
The results indicate that the current single-product market structure using “low liability with high premium subsidies” cannot accommodate the diverse needs among farmers. Providing more varieties of liability-subsidy combinations, e.g. a high liability with low premium subsidy insurance product, can substantially improve participants’ welfare with little impact to the probability of participation.
Originality/value
The authors believe that this is one of the very few studies that that analyze farmers’ preferences and willingness to pay for the attributes of crop insurance products. It also shows how crop insurance product design can build upon farmers’ choices to achieve a potential Pareto improvement in aggregated social welfare in the context of a fast-developing crop insurance market.
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Shen Cheng, Zhihao Zheng and Shida Henneberry
The relationship between farm size and land productivity is a hotly debated issue in the study of agricultural economics and development economics. The purpose of this paper is to…
Abstract
Purpose
The relationship between farm size and land productivity is a hotly debated issue in the study of agricultural economics and development economics. The purpose of this paper is to explore the causes leading to the inverse productivity relationship by examining the relationship between farm size and factor inputs.
Design/methodology/approach
With a large panel data set of farm households in China during 2010–2011, this study uses the factor demand models to examine the relationship between farm size and per-mu labor and non-labor inputs while employing a stochastic frontier production function in determining the difference of labor efforts in farming operation across farm sizes. Moreover, the models for value-added margins and profits are used to further determine producer behavior of small-size farms.
Findings
Results of this study show that, as compared to larger farms, smaller farms not only utilize more labor and non-labor inputs per mu, but also benefit from a higher labor effort. Moreover, smaller farms concentrate more on grain output and cash costs while focusing less on the family labor input costs in an effort to maximize value-added margins rather than profits. The higher yields on smaller farms are thus a result of the utilization of a relatively higher level of labor and non-labor inputs along with skilled-oriented precision farming technology. The inverse productivity relationship is explained by the behavior of small-size producers with employment constraints, leading to smaller farms generating a higher yield than larger farms.
Originality/value
While Sen (1966), Feder (1985), Eswaran and Kotwal (1986) and others have theoretically derived the causal relationship between the incomplete factor markets, especially incomplete labor markets, and the inverse productivity, empirical studies to test the causal relationships are limited. In particular, a solid foundation based on an empirical analysis is lacking when it comes to explaining the inverse productivity in China. Results of this study are expected to have significant policy implications in terms of the understanding of small-size producer behavior and the associated mechanism underlying the inverse relationship between farm size and land productivity.
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Minghua Ye, Kang Chen, Tongjiang Wang and Junsheng Zhu
Crop price insurance can reduce losses from price volatility for crop producers, but pricing is one paramount important issue. The objective of this research is to provide a…
Abstract
Purpose
Crop price insurance can reduce losses from price volatility for crop producers, but pricing is one paramount important issue. The objective of this research is to provide a tentative method for pricing of crop price insurance with data from the futures market.
Design/methodology/approach
With weekly settlement price of January corn futures from the second week of January 2009 to the fourth week of April 2020 in China, we assume that corn futures price follows fractional Brownian motion, and apply an improved Black model.
Findings
Our results reveal that the proposed model can be used to yield a fair premium and crop price insurance with varying insured prices and gradient coverage ratios can be used to meet the divergent needs of farmers at an affordable cost for price risk management purposes.
Research limitations/implications
Results can be fine-tuned by extending research to crops such as wheat and rice, and by modeling price volatility with data from options market.
Originality/value
This study offers one plausible way to rate crop price insurance using data from the futures market, and thus adds to this thread of literature by incorporating fractional Brownian motion into an improved Black model.
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Overuse of chemical fertilizers and pesticides is a major policy concern for many countries. Chinese government has adopted many technologies and management practices to reduce…
Abstract
Purpose
Overuse of chemical fertilizers and pesticides is a major policy concern for many countries. Chinese government has adopted many technologies and management practices to reduce their use. However, little is known about the effects of social-economic method such as short supply chain (SSC) participation. SSC is an important organizational innovation in fresh food supply chains aiming at directly connecting farmers and consumers. Closer relationships between farmers and consumers may result in production behavioral changes. Thus the purpose of this paper is to investigate the impacts of SSC participation on agrochemicals application.
Design/methodology/approach
Based on the household level data collected from Jiangsu province in China, this paper employs an instrumental variable (IV) method to address the self-selection bias when we evaluate the effects of SSC participation on use of chemical fertilizer and pesticides. In addition, this paper also distinguishes between growth inputs and facilitating inputs in the production function when we calculate the marginal production values of chemical fertilizer and pesticides.
Findings
The empirical results show that SSC participation significantly reduces chemical fertilizer use by 351 kg and pesticides costs by 1659 Yuan (RMB) per hectare, accounting for 43.4% of the average chemical fertilizer use and 49.4% of the average pesticide costs, respectively for Chinese vegetable farms. However, SSC participation still cannot improve the use efficiency of agrochemicals.
Originality/value
This paper uses both application quantities and allocation efficiencies of chemical fertilizer and pesticides to comprehensively evaluate the effects of SSC participations. The results will reveal the core role of SSC played in promoting sustainable development of Chinese agricultural sector dominated by small-scale farmers.
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Minghua Ye, Rongming Wang, Guozhu Tuo and Tongjiang Wang
The purpose of this paper is to demonstrate how crop price insurance premium can be calculated using an option pricing model and how insurers can transfer underwriting risks in…
Abstract
Purpose
The purpose of this paper is to demonstrate how crop price insurance premium can be calculated using an option pricing model and how insurers can transfer underwriting risks in the futures market.
Design/methodology/approach
Based on data from spot and futures market in China, this paper develops an improved B-S model for the calculation of crop price insurance premium and tests the possibility of hedging underwriting risks by insurance firms in the futures market.
Findings
The authors find that spot price of crops in China can be estimated with agricultural commodity futures prices, and can be taken as the insured price for crop price insurance. The authors also find that improved B-S model yields better estimation of crop price insurance premium than traditional B-S model when spot price does not follow geometric Brownian motion. Finally, the authors find that hedging can be one good alternative for insurance firms to manage underwriting risks.
Originality/value
This paper develops an improved B-S model that is data-driven in nature. Insured price of the crop price insurance, or the exercise price used in the B-S model, is estimated from a co-integration model built on spot and futures market price series. Meanwhile, distributional patterns of spot price series, one important factor determining the applicability of B-S model, is factored into the improved B-S model so that the latter is more robust and friendly to data with varied distributions. This paper also verifies the possibility of hedging of underwriting risks by insurance firms in the futures market.
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Jiao Yan, Chunlai Chen and Biliang Hu
The purpose of this paper is to analyze the relationship between farm size and agricultural production efficiency from the aspects of output and profit in order to find an optimal…
Abstract
Purpose
The purpose of this paper is to analyze the relationship between farm size and agricultural production efficiency from the aspects of output and profit in order to find an optimal farm size that achieves both output and profit efficiency in agricultural production in China.
Design/methodology/approach
This study uses the 2012 China Family Panel Studies survey data and employs the stochastic frontier analysis (SFA) models to investigate empirically the relationship between farm size and agricultural production efficiency.
Findings
The study finds that there is an inverted-U curve relationship between farm size and output efficiency and a U-shaped curve relationship between farm size and profit efficiency in agricultural production in China. Based on the empirical results, the study estimates that the appropriate farm size is around 10–40 mu and the optimal farm size is around 20–40 mu both in terms of output efficiency and profit efficiency in Chinese agricultural production under the current agricultural technology and land management system.
Practical implications
The findings of this study suggest that appropriate land consolidation will bring more benefits to farmer households and agricultural production efficiency. There are some policy implications. First, governments should give long term and more stable land using rights to farmers through extending the period of land contract and verifying land using rights. Second, governments should encourage transfers of land using rights and promote land consolidation. But the implementation of this policy should consider regional differences and not be used for blindly pursuing increasing land size. Third, land consolidation should be accompanied with the development of specialized agricultural services.
Originality/value
The paper makes two major contributions to the literature. First, the authors use the SFA model to investigate the relationship between land size and agricultural production efficiency. Second, the authors establish two SFA models – the stochastic frontier output analysis model and the stochastic frontier profit analysis model – to estimate the optimal land size to achieve both output and profit efficiency of agricultural production in China.
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Tongwei Qiu, Qinying He, S.T. Boris Choy, Yifei Li and Biliang Luo
This study investigates the effect of renting in land on farm productivity, and the impacts of rented-in land size and transaction partner type on farm productivity.
Abstract
Purpose
This study investigates the effect of renting in land on farm productivity, and the impacts of rented-in land size and transaction partner type on farm productivity.
Design/methodology/approach
Data from the 2015 China Household Finance Survey are analyzed using an extended regression model and the two-stage least squares method.
Findings
Farm households that rent in land are likely to achieve higher farm productivity, and ignoring endogeneity underestimates the positive effect of land renting-in. Further evidence indicates that rented-in land size has an insignificant impact on farm productivity, and that there is no difference in farm productivity between lessees renting-in land from acquaintances and those renting-in land from non-acquaintances. These results may be caused by the higher degree of marketization of land rentals between acquaintances in China. With increasing competition in agricultural factor markets, in theory, rented-in land size should not affect farm productivity.
Practical implications
Overall, the analysis suggests that renting in land improves farm productivity, which supports the land transfer policies that have been rolled out in recent decades in China. However, our finding that rented land size does not affect farm productivity, consistent with the results in the literature, implies that the Chinese government should no longer subsidize or prefer large farms with low productivity. More attention should be paid to small lessees and market-oriented land rentals between acquaintances. Promoting the marketization of land transfers inside acquaintance networks could realize the potential of the land market, especially if land transfers decrease.
Originality/value
This study identifies the effects of renting in land, rented-in land size and type of rental transaction partner on farm productivity using nationally representative data. The findings imply that the government should pay more attention to the marketization of land rentals between acquaintances. Although existing studies regard land rental between acquaintances as informal and of low efficiency, the recent evidence shows that China's land markets are changing, and policy makers should adjust their policies accordingly.
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Hui Tao, Hang Xiong, Liangzhi You and Fan Li
Smart farming technologies (SFTs) can increase yields and reduce the environmental impacts of farming by improving the efficient use of inputs. This paper is to estimate farmers'…
Abstract
Purpose
Smart farming technologies (SFTs) can increase yields and reduce the environmental impacts of farming by improving the efficient use of inputs. This paper is to estimate farmers' preference and willingness to pay (WTP) for a well-defined SFT, smart drip irrigation (SDI) technology.
Design/methodology/approach
This study conducted a discrete choice experiment (DCE) among 1,300 maize farmers in North China to understand their WTP for various functions of SDI using mixed logit (MIXL) models.
Findings
The results show that farmers have a strong preference for SDI in general and its specific functions of smart sensing and smart control. However, farmers do not have a preference for the function of region-level agronomic planning. Farmers' preferences for different functions of SDI are heterogeneous. Their preference was significantly associated with their education, experience of being village cadres and using computers, household income and holding of land and machines. Further analysis show that farmers' WTP for functions facilitated by hardware is close to the estimated prices, whereas their WTP for functions wholly or partially facilitated by software is substantially lower than the estimated prices.
Practical implications
Findings from the empirical study lead to policy implications for enhancing the design of SFTs by integrating software and hardware and optimizing agricultural extension strategies for SFTs with digital techniques such as videos.
Originality/value
This study provides initial insights into understanding farmers' preferences and WTP for specific functions of SFTs with a DCE.
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Zhe Chen, Apurbo Sarkar, Xiaojing Li and Xianli Xia
Based on the survey data of 650 kiwi growers from Shaanxi and Sichuan provinces, this paper used multiple endogenous transformation regression models to explore the effect of the…
Abstract
Purpose
Based on the survey data of 650 kiwi growers from Shaanxi and Sichuan provinces, this paper used multiple endogenous transformation regression models to explore the effect of the joint adoption of green production technology on farmer’s welfare. The purpose of the study is to analyze the influence of green production technology on the yield, household income and socioeconomic characteristics of Kiwi fruit growers.
Design/methodology/approach
In the context of the study, multiple endogenous transformation model (MESR) are adopted, but self-actualization tactics were adopted to deal with the instrumental variables. The empirical data has been collected via a combined hierarchical sampling and random sampling, whereas a well-structured Likert scale questionnaire was adopted as well. The empirical data has been processed with the help of STATA 15.1 version.
Findings
The study found a positive impact of adopting green production technology. Moreover, the joint adoption of green production technology by kiwi growers has significantly increased the yield, economic values of Kiwi and household income of kiwi farmers. The households with higher asset value, better land quality, weaker credit constraints, more technical training and stronger government promotion and support from local governments are the most likely to adopt pest control technology and soil management technology jointly.
Originality/value
The prime innovation of the paper is to measure the impact of technology combination adoption on farmer’s welfare is evaluated, rather than the impact of single sub technology on farmer’s’ welfare.