Factors affecting risk tolerance among small-scale seasonal commodity farmers and strategies for its improvement

Abstract

In developing countries, farming businesses are dominated by small-scale farmers with limited resources. Such farmers are subjected to high risks, influencing the success rate of their agricultural endeavors. This study, conducted in Aceh Province, Indonesia, measured the risk tolerance among six groups of farmers with businesses based on the following seasonal commodities: paddy, corn, soy, chili, potato, and tomato. A total of 360 respondents were surveyed and 54 key respondents interviewed. A Likert scale was used to assess the risk tolerance levels of the farmers, and ordinal regression analysis to analyze the factors influencing risk tolerance. Paddy, chili, and potato farmers had a relatively high tolerance to farming risks, whereas corn and tomato farmers showed a moderate tolerance. Soy farmers were classified into the low risk tolerance category. Ordinal analysis indicated that the risk tolerance of farmers in each commodity group was influenced by specific factors. Overall, it was found that the farmers' attitudes to risk tolerance were significantly affected by the following factors: experience, education, farming income, capital, land status, and land size. An intervention strategy including improvements in the curriculum, actors, network, scope of clusters, and technology are among the strategies required to positively improve farmers’ perceptions and increase their tolerance to farming risks.

Keywords

• Risk tolerance
• Small-scale farmer
• Farmer's perception
• Intervention strategy