Innovations for Agriculture

Transcription

1 DIME Impact Evaluation Workshop Innovations for Agriculture June 2014, Kigali, Rwanda

2 Impact Evaluation Workshop Innovations for Agriculture Managing Risk with Rainfall Insurance Daniel Stein Economist DIME June 2014 Kigali, Rwanda

3 Rainfall Risk is a Big Deal

4 Indemnity Insurance is expensive

5 Rainfall Insurance: High Tech Low Tech

6 Typical Payout Structure payout for phase (2000Rs) (900Rs) 2 nd trigger [corresponds to crop failure] (40mm) 1 st trigger (100mm) rainfall during phase

7 Clarke 2011 The main drawback Basis Risk

8 Will people buy it? How much are you willing to pay? Randomized Offer Price

9 Demand is much lower than predicted by theory Cole, Stein, and Tobacman 2011 This is the market price!

10 Maybe people just have to see how insurance works? In India: Payout of $17 In Ghana: India: Cole, Stein, Tobacman 2014 Ghana: Karlan, Osei, Osei-Akoto, Udry, 2013 People in village 30% more likely to purchase Payouts increase purchasing No payouts decrease purchasing

11 Cole, Stein, and Tobacman 2014

12 What if we bundle with loans? Lots of Customers!!! But in Malawi, requiring insurance decreased demand 13% Malawi: Gine and Yang, 2009

13 Average WTA (Rs) What if we bundle with Savings? % Savings (γ=0) 1/3 Insurance + 2/3 Savings (γ=1/3) 2/3 Insurance + 1/3 Savings (γ=2/3) 100% Insurance (γ=1) Stein and Tobacman, 2014

14 What if we give away a whole lot of insurance? In Ghana: Investment, but = Profits In Andhra Pradesh: Cultivation of Cash Crops, but? Profits Ghana: Karlan, Osei, Osei-Akoto, Udry (2014) Andhra Pradesh: Cole, Gine, Vickery (2012)

15 But under closer to market conditions in India, not much effect Cole, Stein, Tobacman, forthcoming

16 The way forward: More Accuracy Lower Cost Will Technology be the Answer?

17 DIME Impact Evaluation Workshop Innovations for Agriculture June 2014, Kigali, Rwanda

18 Climate and agriculture: What do we know? Marshall Burke UC Berkeley / Stanford DIME Workshop, Kigali, June 2014

19 Crops don t like it dry

20 Crops really don t like it hot -10% / C

21 Crops really don t like it hot -10% / C -7% / C

22 Effect of heat is worse when it s dry Results from maize field trial data Lobell et al 2011

23 What will future look like? Projected changes for East Africa, May - August Temperature Precipitation IPCC AR5 WG1 Chap 12 Best guess by 2050: +1.5C warming, no change in rainfall

24 Increase in variability? In short: we do not know. Some evidence that rain will fall in more intense events No strong evidence that interannual variability will increase Again: main known effect of climate change will an increase in average temperature

25 Impact of climate change Depends on mitigation + adaptation. Assume: business-as-usual. Then: +1.5C x -10% yield/c = -15% yield loss by 2050 Current yield trend for maize: ~0.5%/year Simplest forecast for increase in future yields: 2050 without climate change: + 20% 2050 with climate change: + 5% Population increase by 2050: + 150%

26 Adaptation to climate change What is it? Any response that will improve an outcome. Some options: Change crop management Switch varieties or crops Adopt risk-mitigating financial tools Get out of ag

27 Little evidence that it s happening African maize yields: temperature response over time -8%/ C -15%/ C -12%/ C

28 Switch crops? Temperature sensitivities are slightly lower for sorghum & millet, but yields are also lower Avg maize yields 2x sorghum/millet yields Avg prices are comparable in many regions If you want cactus-like heat tolerance, you get cactus-like yields.

29 Switch varieties? Little breeding so far for heat tolerance. However: As we saw: drought tolerance might help under heat too! (but we don t know yet how much)

30 Change management? Manage soil moisture Irrigation Cost effective for staple grains? Conservation agriculture Opportunity costs? Requires complimentary inputs? Limit heat exposure Shift planting date? But planting date is typically moisture limited

31 Financial tools? Help a lot in current climate But future climate? Everyone is heating up (hard to insure) Every year is on average worse (so harder to smooth with savings or credit) However: better access to finance could promote adoption of new technologies

32 Diversify out of agriculture? Already happening to some degree: - SSA Labor share in ag: 1990s: ~55% 2010: ~47% McMillan et al 2014 But: other sectors are sensitive to climate too!

33 Conclusions Existing technologies/practices are not up to the task. We need: Better understanding of technologies we have: Drought tolerant varieties Strategies to manage soil moisture cost effective? Investment in technologies we will need: Heat tolerant varieties

34 DIME Impact Evaluation Workshop Innovations for Agriculture June 2014, Kigali, Rwanda

35 Impact Evaluation Workshop Innovations for Agriculture Spreading the Risk of Experimentation: Evidence from Bangladesh Daniel Stein Economist DIME June 2014 Kigali, Rwanda

36 New Rice Variety Released!

37 Risky or Ambiguous?

38 In Laos: Ambiguity Aversion Adoption of New Rice Technology In Peru: Ambiguity Aversion Famers grow fewer crops Laos: Ross, Santos, Capon 2010 Peru: Engel-Warnick, Escobal, Lazlo 2007

39 Rice Yield Gap in Bangladesh

40 IAPP: Hey check me out!

41 Farmer 1 Farmer 2 Farmer 3 Farmer 4 Shared Demonstration Plot Incentives for Self- Demonstration

42 Average Number of Demonstration Farmers per Group Included in Analysis Average demo plot size (ha) 0 Regular IAPP Shared Demo Treatment Incentives Treatment 0

43 50% of self-demonstration farmers had worse yield on their small demo plot than seen at a comparable plot using old technology.

44 On Demo/Primary Plots

45 On Demo/Primary Plots

46 On Full Farm

47 Changing Crop Mix Potato, high value high price risk Mung, high value potential, not realized

48 Next step, more data

49 DIME Impact Evaluation Workshop Innovations for Agriculture June 2014, Kigali, Rwanda