Input-price uncertainty and land allocation decisions by farmers

Market uncertainty in agriculture has been suggested to influence farmers to allocate their lands and cultivate different crops each season, thus threatening food production. However, little is known about the effects of such uncertainty on farmers' land-fragmentation decisions. We examine how input-price uncertainty affects land fragmentation along with crop diversification, considering that this uncertainty is approximated by an "input-price deviations," i.e., a difference between the realized market price and the initial expectation of each farmer in a season. It is hypothesized that farm sizes matter in that small-size farms respond to the deviations in a contrasting way compared to large-size ones. Data were collected from a questionnaire survey of 800 Tajikistan farmers, enabling us to develop a new indicator for land fragmentation in addition to a Simpson indicator for crop diversification. Econometric analyses highlight the importance of farm sizes, demonstrating that medium- and small-size farms adjust their land allocation by fragmenting (consolidating) lands for diversifying (specializing) crops against positive (negative) input-price deviation. In contrast, large-size farms are less likely to fragment (consolidate) their lands and display the opposite pattern for diversification in response to input-price deviations. Overall, input-price deviations and the interactions with farm sizes are keys not only in land allocation for agriculture, but also in causing substantial fluctuations for crop productions- consistent with the observed patterns in Tajikistan. Thus, implementing price ceilings or subsidies for agricultural inputs should be considered to mitigate land fragmentation for stable and sustainable food production, as a majority of farms are not large-sized.