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Risk Management Strategies to Cope Catastrophic Risks in Agriculture: The Case of Contract Farming, Diversification and Precautionary Savings

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  • K M Mehedi Adnan

    (College of Economics and Management, Huazhong Agricultural University, Wuhan 430070, China
    Department of Agricultural Finance & Banking, Sylhet Agricultural University, Sylhet 3100, Bangladesh)

  • Liu Ying

    (College of Economics and Management, Huazhong Agricultural University, Wuhan 430070, China
    Hubei Collaborative Innovation Center for Grain Industry, Yangtze University, Jingzhou 434025, China)

  • Zeraibi Ayoub

    (School of Economics and Finance, Xi’an Jiao-Tong University, Xi’an 710049, China)

  • Swati Anindita Sarker

    (School of Economics & Management, University of Chinese Academy of Sciences, Beijing 100864, China
    Department of Agricultural Economics, EXIM Bank Agricultural University Bangladesh, Chapainawabganj 6300, Bangladesh)

  • Rashid Menhas

    (School of Physical Education, Soochow University, Suzhou, Jiangsu 215006, China)

  • Feiyu Chen

    (School of Economics and Management, China University of Mining and Technology, No.1 Daxue Road, Xuzhou 221116, China)

  • Man (Mark) Yu

    (Department of Agriculture and Consumer Science, Box: T0040, Tarleton State University, Stephenville, TX 76402, USA)

Abstract

Risk management is an essential way for farmers to reduce uncertainty. In this research, a stratified random sampling method was used to survey 350 maize farmers in four different agro-ecological regions in Bangladesh. Using the multivariate probit model, this study explored the possible correlation between farmers’ perceptions of catastrophic risks and their attitudes towards risk sources—as well as the possible correlation between contract farming, diversification and precautionary savings as risk management strategies. The results confirm the relevance of risk management adoption decisions and reveal that the use of one risk management tool may simultaneously influence the use of another risk management tool. In addition, the research results also show that age, education level, extension experience, monthly household income, farming areas, land ownership and risk aversion nature are the most important factors that affect the adoption of risk management strategies. The research results provide further explanation and information and provide a platform for decision-makers to predict appropriate risk management strategies.

Suggested Citation

  • K M Mehedi Adnan & Liu Ying & Zeraibi Ayoub & Swati Anindita Sarker & Rashid Menhas & Feiyu Chen & Man (Mark) Yu, 2020. "Risk Management Strategies to Cope Catastrophic Risks in Agriculture: The Case of Contract Farming, Diversification and Precautionary Savings," Agriculture, MDPI, vol. 10(8), pages 1-16, August.
    • Handle: RePEc:gam:jagris:v:10:y:2020:i:8:p:351-:d:398123
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