On the profitability of irrigated fodder production: comparative evidence from smallholders in Koga irrigation scheme, EthiopiaKindie Getnet A C D , Amare Haileslasseie A , Yigzaw Dessalegne B , Fitsum Hagos A , Gebregziabher Gebrehaweria A and Berhanu Gebremedhin B
A International Water Management Institute (IWMI), PO Box 5689, Addis Ababa, Ethiopia.
B International Livestock Research Institute (ILRI), PO Box 5689, Addis Ababa, Ethiopia.
C Present address: International Food Policy Research Institute (IFPRI), Dhaka, Bangladesh.
D Corresponding author. Email: firstname.lastname@example.org
Animal Production Science 57(9) 1962-1974 https://doi.org/10.1071/AN15651
Submitted: 25 September 2015 Accepted: 11 May 2016 Published: 30 August 2016
Irrigated fodder production can be vitalised as a useful strategy to sustainably intensify subsistence livestock production owned and managed by smallholders and to diversify farm income through linkages to commercial livestock systems. However, uncertainty about the production and market environment of such a non-traditional commodity can be a major hindrance against commercialisation and scaling out of irrigated fodder production. This makes ex-ante analysis of profit portfolio and its determinants necessary in order to improve farmers’ investment and risk management decisions. Using a stochastic approach to farm profit analysis to account for business uncertainty, this paper simulated and compared the level and distribution of profit that smallholders in Koga irrigation scheme (Ethiopia) can generate from irrigated Rhodes grass seed and from traditional irrigated crops. The finding shows the absolute and comparative profitability of irrigated Rhodes grass seed. Though 0.19 times less profitable than irrigated onion, irrigated Rhodes grass seed is 4 times, 1.27 times, and 1.25 times more profitable than irrigated barley, irrigated wheat, and irrigated tomato, respectively. Profit from the commodity is robust to adverse business conditions such as yield reduction, cost increase, and price reduction, assuring optimism about positive financial returns from investments to expand production. Long-term business viability can be improved and farm income further stabilised through interventions targeted at fodder agronomy to enhance crop yield and at value chain development to improve market linkages and output price.
Additional keywords: farm profit, Rhodes grass seed, stochastic analysis.
ReferencesAganga AA, Tshwenyane SO (2003) Lucerne, Lablab and Leucaena leucocephala forages: production and utilization for livestock production. Pakistan Journal of Nutrition 2, 46–53.
| Lucerne, Lablab and Leucaena leucocephala forages: production and utilization for livestock production.CrossRef |
Backus GBC, Eidman VR, Dijkhuizen AA (1997) Farm decision making under risk and uncertainty. Netherlands Journal of Agricultural Science 45, 307–328.
Bosch DJ, Eidman VR, Oosthuizen LK (1987) A review of methods for evaluating the economic efficiency of irrigation. Agricultural Water Management 12, 231–245.
| A review of methods for evaluating the economic efficiency of irrigation.CrossRef |
Brown C, Hansen JW (2008) Agricultural water management and climate risk. Report to the Bill and Melinda Gates Foundation. IRI Tech. Rep. No. 08–01. International Research Institute for Climate and Society, Palisades, New York, USA.
Burney JA, Naylorb RL, Postelc SL (2013) The case for distributed irrigation as a development priority in sub-Saharan Africa. Proceedings of the National Academy of Sciences of the United States of America 110, 12513–12517.
Chavas JP, Holt M (1990) Acreage decisions under risk: the case of corn and soybeans. American Journal of Agricultural Economics 72, 529–538.
| Acreage decisions under risk: the case of corn and soybeans.CrossRef |
Clement RT, Reilly T (2001) ‘Making hard decisions.’ (Duxbury: Boston, MA)
Cornaggia J (2013) Does risk management matter? Evidence from the U.S. agricultural industry. Journal of Financial Economics 109, 419–440.
| Does risk management matter? Evidence from the U.S. agricultural industry.CrossRef |
Delgado CL (2003) Rising consumption of meat and milk in developing countries has created a new food revolution. The Journal of Nutrition 133, 3907S–3910S.
Feinstein Center (2010) Impact assessment of small-scale pump irrigation in the Somali region of Ethiopia. PLI Policy Project. Available at http://fic.tufts.edu/assets/CHF-impact-assessment-Somali-Region.pdf [Verified 22 October 2014]
Ferguson RC (1990) ‘Managing for profit in commercial agriculture.’ (Prentice Hall: Summit, NJ)
Getnet K, Haileslassie A, Dessalegne Y (2015) Profit and financial risk in the smallholder irrigated agriculture of Ethiopia, research report.
Hardaker JB (2000) Some issues in dealing with risk in agriculture. Working Paper Series in Agricultural and Resource Economics. University of New England, Armidale, UK.
Hardaker B, Huime RBM, Anderson R, Lien G (2004) ‘Coping with risk in agriculture.’ 2nd edn. (CAB Publishing: Cambridge, MA)
Hazell P, Poulton C, Wiggins S, Dorward A (2010) The future of small farms: trajectories and policy priorities. World Development 38, 1349–1361.
| The future of small farms: trajectories and policy priorities.CrossRef |
Heard JW, Porker MJ, Armstrong DP, Finger L, Ho CKM, Wales WJ, Malcolm B (2012) The economics of subsurface drip irrigation on perennial pastures and fodder production in Australia. Agricultural Water Management 111, 68–78.
| The economics of subsurface drip irrigation on perennial pastures and fodder production in Australia.CrossRef |
ILRI (2009) Linking Fodder Production with Commercial Livestock Production. Third Fodder Roundtable, Addis Ababa. Available at https://cgspace.cgiar.org/handle/10568/544 [Verified July 2016]
Janowicz-Lomott M, Łyskawa K (2014) The economies of Balkan and Eastern Europe countries in the Changed World (EBEEC 2013): the new instruments of risk management in agriculture in the European Union. Procedia Economics and Finance 9, 321–330.
| The economies of Balkan and Eastern Europe countries in the Changed World (EBEEC 2013): the new instruments of risk management in agriculture in the European Union.CrossRef |
Kamara A, Van Koppen B, Maginigxa L (2001) Economic viability of small-scale irrigation systems in the context of state withdrawal: the Arabie Scheme in the Northern Province of South Africa. In ‘2nd WaterNet Symposium: Integrated Water Resources Management: Theory, Practice, Cases’, 30–31 October 2001, Cape Town.
Kang MG, Mahajan N (2006) ‘An introduction to market-based instruments for agricultural price risk management.’ Agricultural management, marketing and finance working document. (FAO: Rome, Italy) Available at https://agriskmanagementforum.org/sites/agriskmanagementforum.org/files/Documents [Verified 1 April 2015]
Kimura S and Le Thi C (2011) Farm level analysis of risk and risk management strategies and policies: Technical Note. OECD Food. Agriculture and Fisheries Papers, No. 48, OECD Publishing, Paris. Available at http://dx.doi.org/10.1787/5kg6z83f0s34 [Verified 21 October 2014]
King AJ, Wallace SW (2012) ‘Modelling with stochastic programming.’ (Springer-Verlag: New York, NY)
Lee J, Gereffi G, Beauvais J (2012) Global value chains and agrifood standards: challenges and possibilities for smallholders in developing countries. Proceedings of the National Academy of Sciences of the United States of America 109, 12326–12331.
| Global value chains and agrifood standards: challenges and possibilities for smallholders in developing countries.CrossRef | 1:CAS:528:DC%2BC38XhtleqsrvF&md5=e63a7c86e41318bc2bcb3caf8c46c154CAS | 21149723PubMed |
Lien G (2003) Assisting whole-farm decision-making through stochastic budgeting. Agricultural Systems 76, 399–413.
| Assisting whole-farm decision-making through stochastic budgeting.CrossRef |
Lien G, Hardaker JB, Flaten O (2007) Risk and economic sustainability of crop farming systems. Agricultural Systems 94, 541–552.
| Risk and economic sustainability of crop farming systems.CrossRef |
Lien G, Hardaker JB, van Asseldonk MAPM, Richardson JW (2009) Risk programming and sparse data: how to get more reliable results. Agricultural Systems 101, 42–48.
| Risk programming and sparse data: how to get more reliable results.CrossRef |
Malan DJC, Louw A, Blignau C (2010) Simulation analysis of risk management for a diversified commercial farm. Agricultural Economics Research, Policy and Practice in Southern Africa 49, 373–395.
Markelova H, Meinzen-Dick R, Hellin J, Dohrn S (2009) Collective action for smallholder market access. Food Policy 34, 1–7.
| Collective action for smallholder market access.CrossRef |
McCullough EB, Pingali PL, Stamoulis KG (Eds) (2008) ‘The transformation of agri- food systems: globalization, supply chains and smallholder farmers.’ (Earthscan: London)
Mohayidin MG (1982) Small farmers’ decisions: utility versus profit maximization. Pertanika 5, 141–153.
Moschini G, Hennessy DA (2001) Uncertainty, risk aversion, and risk management for agricultural producers. In ‘Handbook of agricultural economics, Volume 1, Part A’. (Eds BL Gardner BL, GC Rausser) pp. 88–153. (Elsevier: Amsterdam)
Moss CB (2010) ‘Risk, uncertainty and the agricultural firm.’ (University of Florida: FL)
OECD (2009) ‘Managing risk in agriculture: a holistic approach.’ (OECD Publishing: Paris)
Ogurtsov O, Van Asseldonk MPAM, Huirne RBM (2008) Assessing and modelling catastrophic risk perceptions and attitudes in agriculture: a review, NJAS – Wageningen. Journal of Life Science 56, 39–58.
Oya C (2012) Contract farming in Sub-Saharan Africa: a survey of approaches, debates and issues. Journal of Agrarian Change 12, 1–33.
| Contract farming in Sub-Saharan Africa: a survey of approaches, debates and issues.CrossRef |
Pope R, Just R (1991) On testing the structure of risk preferences in agricultural supply analysis. American Journal of Agricultural Economics 73, 743–748.
| On testing the structure of risk preferences in agricultural supply analysis.CrossRef |
Poulton C, Dorward A, Kydd J (2010) The future of small farms: new directions for services, institutions, and intermediation. World Development 38, 1413–1428.
| The future of small farms: new directions for services, institutions, and intermediation.CrossRef |
Power B, Cacho OJ (2014) Identifying risk-efficient strategies using stochastic frontier analysis and simulation: an application to irrigated cropping in Australia. Agricultural Systems 125, 23–32.
| Identifying risk-efficient strategies using stochastic frontier analysis and simulation: an application to irrigated cropping in Australia.CrossRef |
Richardson JW, Schumann K, Feldman P (2008) ‘Simulation for applied risk management.’ (Department of Agricultural Economics (A&M University: College Station, TX)
Shah T, van Koppen B, Merrey D, de Lange M, Samad M (2002) Institutional Alternatives in African Smallholder Irrigation: Lessons from International Experience in Irrigation Management Transfer. Research Report 60, Sri Lanka, Colombo, International Water Management Institute.
Takeshima H, Yamauchi F (2012) Risks and farmers’ investment in productive assets in Nigeria. Agricultural Economics 43, 143–153.
| Risks and farmers’ investment in productive assets in Nigeria.CrossRef |
Tilahun HK (2009) Payment for environmental service to enhance resource use efficiency and labor force participation in managing and maintaining irrigation infrastructure: The case of Upper Blue Nile Basin. Unpublished MSc Thesis, Cornell University.
Ul-Allah S, Khan AA, Burkert A, Wachendorf M (2014) Socio-economic aspects of fodder production in urban and peri-urban areas of Faisalabad. Pakistan Journal of Agricultural Sciences 51, 483–490.
Wiggins S, Kirsten J, Llambi L (2010) The future of small farms. World Development 38, 1341–1348.
| The future of small farms.CrossRef |