Measuring the Values of On-farm Agrobiodiversity

Devendra Gauchan, PhDBioversity International, Nepal

Email: d.gauchan@cgiar.org

A paper presented in Summer School “Agrobiodiversity in a Changing Climate: Sustainable Production, Fragile Ecosystems,

Resilience to Global Changes; Sapienza University, Bioversity International and Mountain Partnership with the Technical

Support of FAO, Rome, Italy, September 24- October 5, 2018.

Presentation Outline

• Concepts of Economic Values and Valuation of Agrobiodiversity

• Public and Private Values of Diversity

• Measuring Non-Market Values of Diversity

• Varietal Choice and Diversity maintenance

• Market and Value Chain Actors and Analysis

• Valuation Methods and Techniques

• Econometric Models for Variety Choice and Diversity

• Implications of Farmers’ Valuation of Diversity

• Agrobiodiversity is the raw material for the development of

new, improved varieties, which provide a range of important

benefits to farmers and consumers.

• The major benefits of agrobiodiversity are increased

agricultural production, stability in production, food &

nutrition security, income increase and ecosystem services

• Consumers also benefit from low product price, easy

availability of diverse nutritious food products and other

essential goods (fibre, straw etc.) in sustained manner

• It is also the source of future innovation in agriculture, global

food and nutrition security and adaptation to changing

climate and market vulnerability

Economic Importance of Agrobiodiversity

• The annual global value of benefits from improved yield stability derived

from use of genetic resources are estimated at USD 149 million for maize

and USD 143 million for wheat (Gollin 2006).

Evidence of Economic Values of Agrobiodiversity

• The Global annual contributions of genes from a wild tomato species providing

a 2.4% increase in solids content is USD 255 million (Hunter & Heywood, 2011)

• Global benefits of resistance to all types of wheat rusts are estimated between

USD 600 million & USD 2 billion per year (in 2006 USD) (Dubin & Brennan 2009).

• A meta-analysis by Klümper and Qaim (2014) covering 147 publications finds

37% reduction in chemical pesticide use and 22% increase in yields from

adoption of improved crop varieties. Together, the yield gains and cost

savings have resulted in a 68% increase in farm profits

Trend of Shrinking Agrobiodiversity

• Failure of market to appropriate the real value of crop gene pools

• Policy and institutional failure to conserve and utilize them

appropriately

• Technical failure: side effects of certain technical intervention or lack of

technical solutions to effectively conserve and utilize them

Reasons for Erosion of Agrobiodiversity

Intensification, commercialization and market development have

narrowed the genetic diversity as farmers prefer to grow modern uniform varieties that are easy to plant, harvest and thresh using modern tools

This occurs because of under valuation of crop Genetic Diversity including

public good nature of most crop diversity. The specific reasons are:

Rationale for Economic Valuation of Agrobiodiversity

• Allocation of scarce resources to crop diversity conservation as against alternative uses (global arms & ammunition, industrial farming, subsidizing food production etc.)

• Identifying least cost conservation strategies for crop diversity

• Designing suitable incentives/ policy instruments (e.g. legal, R&D, Credit, Subsidy, tax) to supporting conservation

Economic valuation is one way to define and measure values that are useful to

consider in making policy decisions that involve allocation of resources from a

society wide perspective. The rationale for economic valuation are:

• A public good is a product that one individual can consume

without reducing its availability to another individual, and

from which no one is excluded.

• Economists refer to public goods as “ non-rivalrous” and “

non-excludable”.

• An impure public good may be non-rivalrous but

excludable or rivalrous and non-excludable.

• A private good is both rivalrous and excludable.

Concept of Public, Impure Public and Private goods

Typology of “goods” based on economic Attributes

Figure 1. Simplified taxonomies of goods based on economic attributes

Rivalry over use

(a)

pure

private good

pure

public

good

Deg

ree o

f co

ntr

ol

or

ex

clu

dab

ilit

y impure

public

good

waterways

satellite transmissions

regional fisheries

ocean fisheries

Characteristics of impure public goods that

affect the form of institutional intervention

intragenerational regional

global

intergenerational regional

global

characteristic examples

(b)

impure

public

good

Source: Smale etal (2004)

Public and Private Values of Crop Diversity

Crop genetic diversity have two types of values :Private and Public

The seed a farmer plants each year yields two types of value at the same

time. The first, “private” value is the harvest the farmer enjoys which provides

immediate food and income needs .

The second, “public” value is related to the germplasm (unique genetic

traits) from which future generations of farmers and consumers will benefit.

Three types of Public Values (Societal Values):

1. Future income and nutrition security

2. Agrobiodiversity and ecosystem services

3. Maintenance of tradition and culture

Implication of Valuation: Designing Policies for Conservation

III

III IV

low high

low

high

Farm

er u

tility

(cur

rent

priv

ate

valu

e)

Species diversity/genetic diversity

(public value)

III

III IV

low high

low

high

III

III IV

low high

low

high

Farm

er u

tility

(cur

rent

priv

ate

valu

e)

Species diversity/genetic diversity

(public value)

Ex situ

In situ

Total Economic Values: Use and Non Use Values

• Total Economic Value is the construct often used by Economists to identify and measure the value of natural resources including crop genetic resources

• Economic value of crop genetic resources derives from both use and non use encompassing both direct and indirect human use (focus on human society rather than biological system)

• Economic values reflect individuals’ preferences for or against the object being valued. Thus, the economic value of biological diversity could be small if individuals reveal a low preference for its conservation.

• Direct use value do not take into full economic value of the crop diversity

• Indirect use values can not captures unless a conscious act of valuation is practised:

Total Economic Values

Methods of Economic Valuation

• Market Methods of Valuation

1) Revealed Preference Method (Indirect: through observed behavior)

2) Stated Preference Method (Direct: through hypothetical behavior)

• Non-Market Methods of Valuation

Market and Value Chain Analysis

• Value chains can be mapped and analyzed using value chain analysis (VCA). It

can be used to identify obstacles to obtaining greater value for traditional

varieties, to map out relationships among market actors and bottlenecks in

flows of crop genetic resources

• A value chain is made up of a series of actors -from input suppliers, producers

and processors, to exporters and buyers—engaged in the activities required to

bring a product from its conception to its end use (Kaplinsky and Morris 2002).

• The market & value chain approach is a very useful analytical tool for identifying

how to link the various market actors (producers, processors, traders,

consumers).

• The aim is to improve the performance of the value chain by reducing losses,

reducing marketing and/ or other transaction costs, improving the quality and

delivery of the products and placing all the chain actors in an improved position

Market System /Value Chain Analysis

Market Channel Analysis

Market Margin

Analysis

Market Price

Analysis

Market System Analysis

Price signals

Margin&Profit signals

Product flow & outlet of cultivars& Crops

Market Incentive and Disincentive

Analysis

Adapted from market systems analysis (Gauchan et al, 2005)

Linking local products to Market for Value Addition: A case of Taro

Marketing Kaski, Nepal

Consumption“ Value chain concept”

Marketing valued added products

Income

Production

Processing

(Supermarket)

• Production system: Unavailability of diverse & quality

seeds of adapted varieties & crop management technologies

• Market /Promotion system: Poor value chains and

market linkages in urban /organic markets”

Major Constraints in the Value Chains of Underutilized Food Crops Nepal

• Consumption system: Poor awareness of the value of

traditional foods among consumers & “Social Stigma”

• Processing system: Lack of post-harvest and value

addition technologies: Laborious processing with high

women drudgery

• Policy system: Poor and unfavourable seed regulatory

framework and policy environment for the promotion and

commercialization of underutilized food crops

Measuring Non-Market Values

• The real value of crop diversity is not captured in market

prices or market doesnot provide these goods easily. This

occurs due to market failures. The public good nature of crop

diversity allow “ free riders” problems.

• Social, cultural, insurance, and option values of varietal

diversity are underestimated, if left to market.

• Rural households often cannot obtain the attributes of crop

varieties through market exchanges

• People’s behavior in markets may help us understand the value

of associated non-market goods. People’s willingness to pay

or accept is a way to measure non-market values based on

specific attributes of the goods.

Ranking Methods for Measuring Non-Market Values

One of the most straight forward approaches measuring non-market

values involves ranking or rating methods that;

• Elicit from farmers the crop characteristics that are most important to

them, including both production and consumption characteristics

• Ask farmers to assess the extent to which each variety of interest

satisfies the desired characteristics

Limitations to Ranking /Rating Approaches:

• Difficult to relate the more abstract variety characteristics identified

by farmers with a crop’s physiological traits as recognized by scientists

• Ranking and rating results in a long list of varietal characteristics

that may be cumbersome to analyze and utilize statistical technique

0.00

10.00

20.00

30.00

40.00

50.00

60.00

0.00 10.00 20.00 30.00 40.00 50.00 60.00

M a le vo te s (%)

Fe

ma

le v

ote

s (%

)

Non-market valuation: gender, variety

characteristics and preferences

Source: Bellon et al. (2000). Identifying maize landraces for participatory breeding: a case study from the central valleys of Oaxaca, Mexico

Landraces valuation by male and female farmers (%)

Variety Choice and Diversity Maintenance

• The most basic decision farmers make regarding diversity is varietal choice:

which varieties to grow, and on what proportion of crop area to grow each

variety.

• Varietal choice is strongly influenced by the household, farm and market

characteristics, level of environmental heterogeneity and planting

material available to the farmer.

• Variety choice even for a single household change over time and some time

abruptly.

• Varietal choice may be influenced by farmers’ use of or availability of,

complementary inputs such as chemical fertilizers and pesticides or by

subsidies that support particular varieties and chemical inputs.

• Only few economic analysis of crop variety choice have considered traits

other than yield and yield variability including provisions of ecosystem

services

Index Concept Construction Explanation

Count Richness D=S S=number of rice varieties

Shannon Evenness (richness & relative abundance)

Dsh= - ∑i i ln i i=variety area share , i=1,...s

Berger-Parker Inverse dominance(relative abundance)

Dbp= 1/Max (i), Where i= variety area share, i=1,...s

Diversity Non-uniform, heterogeneous population

Yes=1, Otherwise =0

any landrace satisfying this choice criterion

Rarity Unique, uncommon traits

Yes=1, Otherwise=0 any landrace satisfying this choice criterion

Adaptability Wide adaptation Yes=1, Otherwise=0 any landrace satisfying this choice criterion

Note: D= Diversity index. Construction adapted from Magurran (1988).

When one variety is grown, the lower limit of the Shannon index is zero and count and Berger-Parker

indices are both equal to one.

Definition of dependent variables for Multiple

Regressions Models (Poisson, Tobit and Probit)

Source: Gauchan et al, (2006)

Variable name Variable Definition Hypothesized effect

Household characteristic

AGEPDM Age of production decision maker (years) (+)

EDUPDM Education of production decision maker (years) (+, -)

EDUCDM Education of consumption decision maker (years) (+,-)

AAGLABR Active adults working on-farm (number) (+)

FAADTPCT Percent female of actively-working adults (+)

LANIMLV Value of large animals (bullocks, dairy animal) (+)

TOTEXP Average monthly household expenditure since last harvest preceding this

season (exogenous income)

(+, -)

SBRATIO Ratio of 5-year average of kgs rice produced to kgs rice consumed (+, -)

Farm-physical characteristic

IRPCNT Percent rice area under irrigation (+,-)

LNDTYPS Number of rice land types (+)

RDPLCULH Total walking distances (minutes) from house to rice plot, divided by

cultivated hectares

(+)

Market characteristic

TMKTDS Total walking distance from house & farm plots to local market (minutes) (+)

LRSOLD Landrace grain sold by household in preceding season (kgs) (+)

MVSOLD Grain of modern variety sold by household in preceding season (kgs) (-)

Definitions of explanatory variables and hypothesized effects on diversity

Bara (Lowland) Ecosite (N=148) Kaski (Hill) Ecosite (N=159)

Variables Richness Evenness Inverse

dominance

Richness Evenness Inverse

dominance

CONSTANT -0.5533 -0.816*** 0.3927 0.1917 -0.2253 0.6457

AGEPDM 0.0038 0.0052** 0.0064 -0.0068 -0.00157 -0.0061

EDUCDM -0.0479 -0.0420* -0.0861** 0.0308 0.00539 0.00213

EDUPDM 0.0405 0.0193* 0.0331* 0.0243 0.00076 -0.0087

FAADTPCT -0.6165 -0.2571 -0.4569 -0.5358 -0.07935 -0.6042

AAGLABR 0.1896 0.0781*** 0.0214 0.4853*** 0.14407*** 0.1243*

LANIMLV 0.000007 0.000005 0.000004 0.00001 0.000005 0.00002*

TOTEXP 0.00003 0.00002 0.00008 0.00004 -0.000003 -0.000008

SBRATIO 0.2940 0.2163*** 0.2584* 1.2590* 0.31802** 0.4851

IRPCNT 0.2537 0.1203* 0.2436** 0.4486 0.04772 -0.1327

LNDTYPS 0.4198* 0.1937*** 0.1233 0.4138 0.1141* -0.1292

RDPLCULH -0.0003 -0.0002 -0.0003 0.0026** 0.00072*** 0.00151**

TMKTDS 0.0012 0.0009*** 0.0012*** 0.0013*** 0.00027** 0.0003

LRSOLD -0.0002 -0.0002 -0.0003 -0.00061 0.00002 -0.0002

MVSOLD -0. 00005 -0.00009* -0.00014* -0.00057 -0.0003* -0.0006

Log likelihood

function

-204.6 -78.63 -157.15 -263.34 -85.72 -250.75

Factors explaining variation in the diversity of Rice Varieties, Nepal

(Marginal Effects of Poisson and Tobit Regression Models)

Source: Gauchan et al (2006)

Use of Information about How Farmers Value Diversity

in Management Decisions and Recommendations

• Governments and other institutions commonly devise and

implement production subsidies, tax breaks, price controls and

other agricultural policies that influence-directly or indirectly

farmers’ decisions about agrobiodiversity

• Understanding how farmers value diversity is a first step in

devising agricultural policies that provide incentives for

maintaining diversity on-farm

• Both market and non-market values of diversity are important

starting points for policy development to support on-farm diversity

References

.

• Abdullah, S., Markandya, A. and P.A.L.D. Nunes (2011) ‘Introduction to Economic Valuation Methods’ in Amit Batabyal & Peter Nijkamp

(Eds.) Research Tools in Natural Resource and Environmental Economics, Chapter 5, pp. 143-187, World Scientific, US.

• Birol, E., M. Smale and Á. Gyovai. 2006. Farmer management of agricultural biodiversity in Hungary’s transition economy. Valuing Crop

Biodiversity: On-Farm Genetic Resources and Economic Change, In. M. Smale (eds). Wallingford, UK. CABI Publishing.

• Gauchan, D. and M. Smale, 2007. “Comparing the Choices of Farmers and Breeders: The Value of Landraces in Nepal”. In: D. Jarvis, C.

Padoch and D. Cooper (eds).Managing Biodiversity in Agricultural Ecosystems. Chapter 16: p407-424.Bioversity International,

/CBD/SDC/IDRC/ UNU, Columbia University Press, New York.

• Gauchan, D. M. Smale, N. Maxted and M.Cole. 2006. Managing Rice Biodiversity on Farms: The Choices of Farmers and Breeders in Nepal.

In M. Smale (eds). Valuing Crop Biodiversity: On-farm Genetic Resources and Economic Change. pp 162-175.CABI publication in

association with IPGRI/IFPRI/FAO.2006. cha 6. pp+162-176.

• Gauchan D., M. Smale and P. Chaudhary, 2005. Market-based Incentives for Conserving Diversity on-farm: A case of rice landraces, Central

Terai, Nepal. Journal of Genetic Resources and Crop Evolution 52:293-303.

• Gauchan D. and M. Smale. 2003. Choosing the “ Right Tools” to Assess the Economic Costs and Benefits of Growing Landraces: An

illustrative example from Bara District, Central Terai, Nepal. Plant Genetic Resources Newsletter, (2003)134:41-44.

• Hellin, J. and M. Meijer. 2006. Guidelines for Value Chain Analysis. Food and Agriculture Organization (FAO), Rome, Italy

• Meng, E. C. H., Smale, M., Bellon, M. R., and Grimanelli, D.1998. Definition and measurements of crop diversity for economic analysis. In:

Smale, M. (ed.). Farmers, Gene Banks and Crop Breeding: Economic Analyses of Diversity in Wheat, Maize, and Rice. Kluwer Academic

Publishers, Boston, pp. 19-31

• Smale, M., I. Mar and D. I . Jarvis, (Eds), 2002. The Economics of Conserving Agricultural Biodiversity On-farm. Research Methods

developed from IPGRI’s Global Project” Strengthening the Scientific Basis of In situ Conservation of Agricultural Biodiversity. IPGRI

(Bioversity International), Rome, Italy

Thank You for your Attention !!

Website: www.himalyancrops.org

www.bioversityinternational.org

For further information:d.gauchan@cgiar.org