AGRICULTURAL TECHNOLOGY ADOPTION & FOOD SECURITY IN AFRICA EVIDENCE SUMMIT JUNE 1-2, 2011 WASHINGTON, DC

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1 AGRICULTURAL TECHNOLOGY ADOPTION & FOOD SECURITY IN AFRICA EVIDENCE SUMMIT JUNE 1-2, 2011 WASHINGTON, DC Panel Discussion on: Strategies for increasing adoption of profitable agricultural technology: Role of policies, institutions, social networks, and supply chains

2 STRATEGIES FOR INCREASING ADOPTION OF PROFITABLE AGRICULTURAL TECHNOLOGY: ROLE OF POLICIES, INSTITUTIONS, SOCIAL NETWORKS, AND SUPPLY CHAINS Panel Chair and Moderator: Mywish Maredia (MSU) Panel members: Norm Uphoff (Cornell) Experience with multi-sectoral strategies for disseminating a proven agricultural technology Ruth Vargas Hill (IFPRI) Informal risk-sharing groups and rainfall insurance Duke Burruss (DAI) Market development, supply chains, private sector linkages

3 Technology Supply vs. Effective Demand: Facts and Reality Facts on the Supply side: Growing evidence of increasing availability of new technologies to farmers in Africa Annual Reports of some African NARS provide impressive lists of technologies developed by them Many technologies in the pipeline or already made available to African farmers today than ever before Demand side reality: Increasing supply of new technologies has not met increasing acceptance by producers (as reflected by low adoption rate)

4 Low effective demand for technology by African farmers: What does it imply? It implies one or all of the following: It implies that a technology developed by the research system: Does not reach the end users Is not affordable by them Has not proven profitable for them This panel is focused on the last two implications and addresses the evidence question: What role do policies, institutions, social networks, and supply chains play in increasing the affordability and expected profitability of improved technologies (to increase adoption)?

5 Concepts Affordability: Relates to the cash requirements for adopting a technology Expected profitability: Relates to profitability expectations in farmer s physical, social, and economic environment not the researcher controlled experiments (which are risk free) Is assessed in relation to alternate opportunities (including production with current technology); and Requires a threshold level of incremental profits to entice an individual to adopt

6 Concepts (cont d) Adoption decision faced by individual farmer Adopt a technology if: E(П n ) - E(П a ) > α > 0 Threshold level of incremental profits (α): Captures farmers risk attitudes towards a new technology It is not uniform across all adopters and regions. It depends on : Profiles of technology users (social status, gender, education) Economic status (smallholder versus commercial farmers) Type of technology (mechanical versus agronomic practices)

7 What influences expected profitability of technology? (Un)certainty of variables that determine the profitability outcome (e.g., Input and output prices) which are influenced by non-technology factors such as government policies, infrastructure development, other institutional conditions, rainfall, farmer s ability to store the final output for several months, etc. Probability that the technology will yield a minimum level of net revenue, which depends on expectations about the adaptability of a technology to the local climatic conditions, expectations about the timely availability of inputs and other technology components (an efficient inputs market) expectations about access to output markets expectations about the functioning of a credible credit system, well-functioning insurance/compensation system that protects them against undue risks

8 Key Messages Both technological considerations (e.g., performance and adaptability of technology) and non-technological considerations (institutions, policies, infrastructure, social networks, etc.) play important roles in the realization of profits and the decision to adopt or not to adopt a technology Improved policies, infrastructure and institutions minimize risks/uncertainty and increase the probability of realizing higher profitability from adopting a technology

9 What is the evidence on the role of nontechnological factors in increasing profitability (and thus adoption) of technology? This is the question focused by the three panel members Ruth examines the role of insurance and informal groups in the uptake of fertilizer in Ethiopia Duke presents a case study of Ghana on how innovations like commercial frameworks that link farmers with private sector partners, and associated infrastructure development help in mitigating risk and technology adoption throughout the value chain. Norm gives several examples of multi-sectoral approaches used in the dissemination of SRI technology

10 But let s first review (briefly) the evidence found in the literature

11 What is the evidence on the role of nontechnological factors in increasing profitability? Results of a Systematic Review conducted by Maredia and Del Carpio (IEG/World Bank, 2011) The review includes 14 observations across 10 studies that use rigorous IE methodology to address this question The studies look at impacts of wide ranging interventions that promote linkages with buyers and sellers, enable farmers to engage in contracts, benefit consumers through better pricing, and provide incentives for group formation and social learning Some interventions in this category aim to relieve constraints on farmers, producers, and sellers to increase productivity throughout the value chain

12 Results of the Systematic Review Major findings: Cooperatives and farmer associations function as coordinating mechanisms for linking farmers to markets. Several contract arrangements influence the use of modern production inputs more broadly for both commercial and noncommercial crops. Lack of market information, financial risks, and access to markets reduce farmers incentives to adopt high-value crops and to participate in marketing schemes

13 Overall positive results from available evidence Explanatory variables (Participation in) Impact indicators measured Number of IEs with evidence of impact on the indicator 0 + Contract Gross margins Contract for expt crops Interlinked inputoutput-credit arrangements for export crops Special output marketing channels Yields of food crops 1 Value of harvested produce Value of harvested produce Fertilizer on food 1 crops Price of the produce 3 Household income 1 Total observations