Recently, no-tillage cultivation practice of rice is receiving great attentions from agricultural researchers, policy makers and farmers because it is related with environmentally friendly practice to reduce carbons and greenhouse gasses and to cope with labor shortage and rapid aging of workforce in agricultural sector. Among the interest groups, farmers are final decision makers weather to accept or not the practices by considering expected income and risk they face. However, no information about the effect of no-tillage practice compared to other cultivation practices of rice is available to farmers, especially in view of economic outcome under uncertainty. Fortunately, National Institute of Crop Science (NICS) produced data for yields and greenhouse gasses emission from several practices including no-tillage practice with three years experiments in rice field.
This study analyze the economic outcome of several cultivation practices under uncertainty with the field data obtained from NICS from year 2014 to year 2016, where the practices include tillage, wet-direct seeding, partial tillage and no-tillage. For the analysis we introduce farmer’s risk preference to reflect his/her risk averse attitude and adopt stochastic dominance analysis, which are basically grounded on simulation technique and utility function. We form empirical distribution functions and beta distribution functions for each alternative practice, where the former are based on empirical field data and the latter based on the best fitted distribution functions from empirical data. The negative exponential utility function is adopted to refect farmer’s risk aversion coefficient with constant absolute risk aversion (CARA).
The results show that farmers with risk neutral preference (r=0) always prefer wet-direct seeding practice to other alternative practices irrespective of the magnitude of cost saving. The preference among alternatives, however, varies according to risk aversion coefficient and magnitude of cost saving. When farmers are risk averse (r=0.04), no-tillage practice is the most preferred alternative with cost saving from 100% to 56% but tillage practice is the most preferred alternative with cost saving less than 55%. When farmers are high risk averse (r=0.08), partial tillage practice is the most preferred alternative with cost saving from 100% to 65% but tillage practice is the most preferred alternative with cost saving less than 65%.
This study also provides confidence premium (risk premium) that makes indifferent between the most preferred practice (the base practice) and the comparable alternatives according to the mix of risk preference and magnitude of cost saving. The premium is a kind of compensation to be given to farmers for choosing one alternative to the other alternative. The bigger the premium, the harder the alteration of alternatives from the most preferred practice (the base practice).
This study is expected to be helpful to farmer’s decision making for adoption of cultivation practices of rice. Farmers can choose the best alternative according to their risk preferences among the rankings of alternatives determined by the mix of risk preference and magnitude of cost saving. In addition, policy makers can choose any alternatives desirable to protect environment and support the selected alternatives with appropriate government programs.