Impacts of price and yield variation on profitability of management plans of subsistence farmers in Sri Lanka

Abstract

It has been suggested that a major issue that affects the adoption of new farming practices, particularly in subsistance farming areas, is the additional risk and uncertainty associated with them. A mathematical programming-decision theory framework is used to evaluate the impacts of price and yield variations on the profitability of possible production or management alternatives available to typical small farmers in Sri Lanka. The results indicate that more traditional management plans are generally inferior to more profitable plans that utilize improved rice varieties, increased levels of fertilizer and irrigation water, and greater cultivation of higher value cash crops. The results also suggest that available management skills, limited capital, and the unreliability or lack of confidence in cash crop markets influence Sri Lankan farmers' management plan decisions more than considerations of price and yield variability.