Extension Services for Effective Agricultural Risk Management

Kristin Davis and Rasheed Sulaiman, Global Forum for Rural Advisory Services (GFRAS)

FARMD (June 2013) | Small-scale agricultural production has always been a risky business.  What do extension and advisory services (EAS) have to do with agricultural risk and risk management options?  This article will look at various ways that extension services can help mitigate risks before they occur and contribute to management after a risk has been realized, giving some examples from around the world.

To start, a definition of EAS is needed. We define extension and advisory services as consisting of all the different activities that provide the information and services needed and demanded by farmers and other actors in rural settings to assist them in developing their own technical, organisational, and management skills and practices so as to improve their livelihoods and well-being. The definition recognises the diversity of actors in extension provision (public, private, civil society). It envisions much broadened support to rural communities (beyond technology and information sharing), including advice related to farm, organizational, and business management; and facilitation and brokerage in rural development and value chains.

Box 2. Addressing Risks in Agriculture – The India Policy Framework

As it is currently operating, the Comprehensive Agriculture Risk Management Framework in India has three main categories:

  • Direct initiatives on the part of the government, such as agricultural credit, input subsidies, and calamity relief
  • Indirect initiatives on the part of the governmentto mitigate production risks through insurance mechanisms covering crops, weather, and livestock, including micro insurance
  • Government and market-based approaches to mitigate price or income risks, which includes minimum support prices, farm income insurance, a price stabilization fund, commodity markets, contract farming, etc.

Smallholder producers face many risks; weather disasters, price fluctuations, climate change, engagement in markets, and globalization all entail risk to farmers. Smallholders are expert risk managers and use mixed strategies such as intercropping, staggered growing, and planting of “famine crops” such as cassava to help them deal with risks. However, they usually have limited options to manage farming risks. Consequently they require a mix of extension support. We must mobilize extension for flexible livelihood support through initiatives that encourage the diversification strategies that smallholders already use (Christoplos 2010).

EAS can help to mitigate risk through providing information and through knowledge-sharing platforms and other types of facilitation and brokering. Extension can help to manage risks through provision of inputs and through support to schemes such as weather insurance. Risk management for smallholder requires a policy framework. But quite often the role of knowledge in mitigating risk is notrecognised (Box 2).

Mitigating Risk: Information, knowledge-sharing platforms, and brokering

In the position paper “Mobilizing the potential of rural and agricultural extension,” Ian Christoplos states that to deal with risk,smallholders need new forms of extension to help them to understand and manage risks. EAS must be flexible to respond to the varied demands of smallholders. Extension services should provide or link to information and knowledge regarding weather and climate change (Box 3), market prices, regulatory structures, quality standards, consumer demands, and access to (micro) credit (Christoplos 2010: p. 21). Extension and advisory services can use ICTs to better share information.

Box 3. EAS and Climate Change

Agricultural extension can play a role in achieving synergies between climate change adaptation and mitigation. Low carbon alternatives for agriculture can reduce risk by reducing dependence on capital inputs in the form of agrochemicals and may also reduce demands on increasingly strained water resources. Some minimum tillage farming methods and measures to restore degraded lands can both reduce emissions and reduce run-off, flooding, erosion and landslide risks in the event of heavy rains or drought. Farming methods that increase carbon storage can also enhance moisture retention. Certification may provide an extra price premium on products that are more adaptable to climate variability, but which would otherwise be unattractive due to lower productivity. In all of these areas, extension has a role to play in informing farmers about the changing sets of incentives for different choices in agricultural production.

Christoplos, 2010: p. 41

Farmers’ exposure to risk and uncertainty is often aggravated by lack of information about weather, inputs, farm management practices, or market prices, and this lack of information has an adverse impact on crop production and income. Some of these risks, for example that of a bad monsoon, affect agriculture as a whole, while other risks vary from region to region, and the severity of their effect depends on an individual farmer’s knowledge and ability to cope. The evidence suggests that a farmer who receives quality, up to date information, and has the ability to use that information is able to lessen the effect of these risks. Mobile-based information services influence the behavior pattern of farmers, and this facilitates the dissemination of information and the adoption of improved techniques, leading to better yields. Information about weather and prices helps farmers to reduce their production and market risks.

EAS also play a role in education and training for smallholder farmers. Curricula and information material already exist to teach farmers how to deal with risk in teh agriculture sector through the University of Minnesota. Many of the curricula are adaptable, and can be adapted by advisors who are working with farmers on issues of production, price, finances, legal, human and workforce, and other risk factors.

Extension has a special role in helping the rural poor to manage risks resulting from extreme events, which may include natural hazards or conflict. The main role for EAS in terms of these risks is before the disaster. Extension for sustainable watershed and natural resource management can promote resilience and reduce risks from floods and droughts. Extension that facilitates platforms for different stakeholders to meet and discuss market, land use, and other contentious issues can contribute to mitigating local conflicts (Christoplos 2010: p. 26).

EAS today play a critical brokering and facilitation role within agricultural systems. In addition to providing information, this linking role is important. For mitigating risk, EAS can link up different players that have a stake in this including smallholders, research, insurance providers, input dealers, and other market players.

Managing Risk: Inputs and insurance

Seed and input provision are often a part of humanitarian response in post disaster and post-conflict situations, and EAS can have a central role in informing those providing such assistance about what is appropriate in the affected areas, where inputs could be possibly provided from local sources, and helping farmers learn to use new varieties. As an intermediary institution, with knowledge of markets and natural resource management regimes, EAS can also help to ensure that agricultural rehabilitation programmes are relevant and sustainable. Extension is often the only agency in place in rural areas to assist after a disaster (Christoplos 2010: p. 26).

Box 6. Risk Management and Role of Advisory Services - Experience from India

In India, agricultural risks are exacerbated by a variety of factors, ranging from climate variability and change, frequent natural disasters, uncertainties in yields and prices, weak rural infrastructure, imperfect markets, and lack of financial services including limited span and design of risk mitigation instruments such as credit and insurance.

In India, private insurance companies such as ICICI Lombard, IFCO –Tokyo, Reliance, and Cholamandalam have widely participated along with Agriculture Insurance Company providing Varsha Bima since 2005.

BASIX in India is an important advisory services actor that also has used weather insurance. Advisors can help to play a role by helping smallholders to understand the product and to link farmers to providers of insurance.

Rasheed Sulaiman V, Agricultural Extension in South Asia (AESA)

Weather insurance schemes can also help to manage risk, and extension and advisory services can play a support role in these initiatives (Box 6). Weather index insurance covers weather-related risks such as drought and excess rain. It can be made affordable for smallholders, if costs are kept low, for example by using weather stations instead of visiting individual farms. Weather index-based insurance is usually offered to small farmers through their cooperative, input dealer, a microfinance institution or bank. It can help them mitigate the weather risks that they cannot control. For example, the Syngenta Foundation uses an agriculture index insurance called Kilimo Salama (Syngenta Foundation 2013).

Summary

  1. Extension and advisory services play a critical role in reducing and managing risk for smallholders
  2. In addition to communication and knowledge sharing, EAS should support smallholders at risk through facilitation, networking, and brokering for risk management
  3. While information sharing and use of tools such as ICTs can support communication of information that can potentially reduce risks, use of mechanisms such as weather insurance can compensate for risks that have occurred

For More Information