Market-Based Incentives for Conserving Diversity on Farms: The Case of Rice Landraces in Central Tarai, Nepal Devendra Gauchan University of Birmingham,

Market-Based Incentives for Conserving Diversity on Farms: The Case of Rice Landraces in

Central Tarai, Nepal

Devendra Gauchan

University of Birmingham, UK and

In Situ Agrobiodiversity On-Farm Project Nepal (NARC/LIBIRD/IPGRI)

Presented at BIOECON Conference, Venice, Italy, 28-29th August 2003

Presentation Outlines

• Background to study

• Market Incentives & Crop Genetic Diversity

• Research Methods

• Findings: Market share, market channels, price and margin analysis and Market Participation

• Summary and conclusions

• Implications for policy and research

Background to Study• Rice-a globally important food crop & also for Nepal• Landraces- sources of global crop genetic diversity and

livelihood security for farmers in agroecosystems

• Markets can provide signals for farmers decisions to maintain or abandon diverse landraces (LR)

• Markets if function well, could be cheapest instruments to conserve agrobiodiversity on-farm

• However, so far, market studies have focused mainly modern varieties (MV)- studies on market and policy incentives & disincentives to maintain landraces are lacking

Rice Varietal Diversity

Landrace-Late maturing Landrace-Early maturing

Landrace Intermediate

Market Incentives and Issues • Markets may be “thin” for LRs; Price signals may be

limited use to provide incentives to cultivate

• Markets may function poorly- farmers produce for own consumption affecting choice of varieties

• The attributes that farmers demand for production & own consumption may not be recognised and valued by other consumers

• Price premium may not transmit consumer demand for quality when attributes are not transparent

Market & Policy Incentives &

Disincentives • Technological change, with development of markets

provide incentives for Modern Varieties over Landraces.

• Input markets biased to MVs with direct seed subsidies or hidden subsidies on other inputs (e.g. fertilizers).

• Information problems inherent in new seed technology biased for MVs through public extension & trainings

• Asymmetry of information and poor flow of market information in landraces .

Case Study Purpose

• Advance scientific understanding of the incentives the farmers have to grow landraces as the market environment changes in Nepal

• Study premise: If the superior traits of landraces recognised and valued in markets -they could deliver incentives in the form of price premiums

Map of Nepal and Study Site

Bara Ecosite

Terai

Research Methods

• Baseline household survey of farmers (N=202)

• Key Informant Survey, Focus groups and other Informal methods (e.g. direct observation)

• Market channels, market actors & product flow

• Marketing costs and Margin Analysis

• Market price analysis: Price Differentials between LR and MV and Within LRs

Analysing Market Incentives

Market ChannelAnalysis

MarketMargin

Analysis

Market PriceAnalysis

MarketSystem

Analysis

PriceSignals

Margin andProfit Signals

Product Flowand Outlet of

Cultivars

Analysis ofMarket Incentives

Market Channels• Producer-Sellers

• Local market intermediaries: Golas, Bania, Kutuwa, Paldar, Kawarni etc.

• Small-scale local processors e.g. custom mills

• Large scale trader processors e.g. Millers(de-huskers)

• Exporter /importer of milled rice, parboiled rice

• Wholesalers of milled rice

• Retailers

• Local farmer & urban consumers

Market Channels & Practices

Small scale traders

Collection point at Gola-Large-scale traders

Rice Market and Landraces

• Less than half of the households sell rice• Farmers grow 53 varieties of which, 33 are LRs• Two landraces were formally traded in market• Market recognises only phsically observable quality

i.e coarse and fine grain types• Many coarse LRs traded informally in small scale

irregularly and are of heterogenous grain types• Fine grain aromatic Basmati LR traded in formal

market in small scale

Market Shares for Landraces

Market Share by Rice Types

Modern varieties (75%)

Landraces(25%)

Market Transaction of Rice Landraces

Informal Channel (75%)

Formal Channel (25%)

Market Price and Margin Analysis

• Price Differentials between LR & MV high and observable for some landraces

• The ratio of average farmgate and market price to those of similar MVs for Basmati LR is > 1 whilst for the coarse grain Mutmur LR < 1

• Coarse grained landraces considered poor quality in formal market & lower margins and profits

• Though profit margins for local Basmati-fine landrace is high, its market is affected by the supply of cheaper Basmati from across the border

Market Participation & Rice Diversity

• Farmers selling rice have larger farm, more literate and wealthy as compared who donot sell rice

• Farmers selling rice grow more no of varieties both LRs and MVs & have larger area in MVs

• Higher % of farmers selling rice maintain more combination of LRs & MVs

• Farmers growing marketable landraces (Basmati) were “better off” with less off-farm work

Varietal Ratings for Attributes

• Inferior physical attribute is valued in market but not their superior agronomic attributes

• Basmati rated higher for consumption but low for agronomic attributes

• Coarse grained LRs Mutmur rated higher for agronomic attributes but lower for consumption

Disincentives to Landraces

• Landraces face disincentives both from market and policy environments

• Market development favouring modern varieties (MV) over landraces

• Seed and input subsidies directed to MVs

• Public funded extension and training support given for only MVs

Summary and Conclusions

• Mostly informal and “thin” market for landraces

• Superior Traits in LRs are not recognized in market -except consumption traits of aromatic varieties

• Price signals for many landraces are not generally transmitted from consumer to producers

• Farmers growing Basmati landrace are “better off” than other landraces growers

• In contrast to coarse types, market incentives for high quality aromatic Basmati landrace is high.

Implications for Research & Policy• Value addition & market linkage of landraces with high social value is

needed

• However, further analysis of costs and benefits-before specific mix of policy intervention

• Not all the landraces are equal: Market dev. & incentives may favour one landrace to other types

• The tacit assumption that the poor who maintains rice landraces needs further empirical work

• The genetic contribution of landraces types is unknown; if poor maintain unqiue alleles, then there may be trade off in efficiency vs equity.

THANK YOU

Price in Rs/QtlRiceCultivars Farm

gateMarket

Marketing costsRs/Qtl

GrossMarketing

margins(%)

NetMarketMargin

(%)Mutmur 700 800 60.0 12.50 5.0

China-4 725 850 60.0 14.70 7.65

Sabitri 750 900 60.0 16.66 10.0

Basmati 850 1100 60.0 22.72 17.27

Market Price and Marketing Margin

LRs=Mutmur & Basmati; MVs=China-4 & Sabitri

Sells in ricemarket (n=90)

Does not sell inrice market(n=107)

AllHouseholds(n=197)

Percent of farmers (+)

Growing landraces only 4 9 7

Growing modern varieties only 38 62 51

Grow both landraces and modernvarieties

58 29 42

100 100 100

Mean among farmers

No of landraces grown 1.14* 0.476 0.78

No of modern varieties 2.33* 1.58 1.92

Number of total varieties grown 3.48* 2.065 2.71

Percentage rice area in landraces 20. 2 19.2 19.7

Percentage rice area in modern varieties 92.0* 42.0 80.3

Rice Variety Choices and Market Participation

(*)Pairwise T- Test & (+) Chisquare Test significant (P< 5%) level

Household characteristics Sells inricemarket(n=90)

Does notsellin ricemarket(n=107)

AllHouseholds(n=197)

Mean among farmers

Farm size (hectare) 1.30* 0.76 0.89

Percent among farmers

Literate (+) 52 33 42

Highest wealth rank (+) 18 7 13

Lowest wealth rank (+) 30 71 56

Wealth, Farm Size, Literacy &Market Participation

(*)Pairwise T- Test & (+) Chi-square Test significant (P< 5%) level

No. ofadultsworking on-farm

No. ofadultsworkingoff-farm

Share of totallaborworking on-farm

Farm size(ha)

Foodsufficiency (mos.)

Highestwealthrank

Mean PercentGrow Basmati 2.75 0.39* 0.89* 1.74* 10.56* 33

Do not growBasmati

2.67 0.70 0.79 0.71 6.63 7

Grow modernvarieties

2.67 0.60** 0.82 0.93** 7.52** 11

Do not growmodernvarieties

2.78 1.21 0.71 0.46 5.11 14

Sauce-Economic Status of Growers of Basmati & MVs

(*)Pairwise T- Test & (+) Chi-square Test significant (P< 5%) level