Managing farm-centric risks in production at the flood-prone locations of Khyber Pakhtunkhwa, Pakistan

Abstract: The monsoon floods of 2010, 2011, and 2014 in Pakistan caused severe damage to crops, fisheries, forestry, livestock, and primary infrastructures, such as water channels, tube wells, houses, people, seed stocks, animal shelters, fertilizers and agricultural equipment/machinery. Floods are a major source of risk to agriculture in Pakistan and other countries in South Asia. In response to these risks, management in agriculture is not only crucial for avoiding risk but also has ramifications concerning the optimum combination of risks and returns that can result of a wide range of outcomes. This thesis evaluates farmers’ perceptions about various sources of weather-related risks in farming and their attitudes towards these risks. It also explores the simultaneous adoption of risk management strategies. A survey was conducted with 200 farm households. Farmers’ perceptions about risk were measured on a Likert scale, and the risk attitude of the farmers was measured through a cubic utility function. In addition, probit and multivariate probit models were used to analyze the influence of socio-economic and demographic factors on the management decisions of farmers. Among the small farmers, the majority perceived floods and heavy rains as a major source of risk. Younger farmers were more risk-loving than older farmers. Inexperienced formers were also more risk-loving. Three informal management strategies were adopted in the study area: assets depletion, consumption reduction, and diversification at the farm level. As age and education increase, the propensity to deplete assets increases. In addition, management strategies were associated with socioeconomic characteristics of farmers to their risk perceptions and risk attitudes.