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Title: Evaluation criteria in the analysis of technological alternatives for limited-resource, family farmers
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Title: Evaluation criteria in the analysis of technological alternatives for limited-resource, family farmers by Peter J. Wotowiec and Peter E. Hildebrand
Physical Description: 8 leaves : ; 30 cm.
Language: English
Creator: Wotowiec, Peter J
Hildebrand, Peter E.
Publisher: Peter E. Hildebrand
Place of Publication: Gainesville, Fla.
Publication Date: 1995
 Subjects
Subject: Farms, Small -- Economic aspects   ( lcsh )
Agricultural systems -- Research   ( lcsh )
Genre: federal government publication   ( marcgt )
non-fiction   ( marcgt )
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General Note: "Class handout for AEB 5167, Economic Analysis of Small Farm Livelihood Systems."
General Note: Typescript.
General Note: "Prepared for Spring Semester, 1987 ...(Revised June1995)."
General Note: "AEB 5167, Economic Analysis in Small Farm Livelihood Systems, Fall Semester, 1995, Dr. Peter E. Hildebrand."
Funding: Electronic resources created as part of a prototype UF Institutional Repository and Faculty Papers project by the University of Florida.
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Bibliographic ID: UF00072231
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
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Resource Identifier: oclc - 76824350

Table of Contents
    Title Page
        Title Page
    Table of Contents
        Page 1
    Identifying relevant evaluation criteria
        Page 2
        Land as a scarce resource
            Page 3
        Labor as a scarce resource
            Page 3
        Cash as scarce resource
            Page 3
        Considerations related to risk
            Page 4
            Page 5
            Page 6
        Considerations related to other farm-household activities
            Page 7
            Page 8
Full Text
/p. '4



EVALUATION CRITERIA IN THE ANALYSIS OF TECHNOLOGICAL ALTERNATIVES
FOR LIMITED-RESOURCE, FAMILY FARMERS


ECONOMIC ANALYSIS


CLASS HANDOUT
for
AEB 5167
OF SMALL FARM LIVELIHOOD SYSTEMS


PREPARED FOR SPRING SEMESTER, 1987
BY
PETER J. WOTOWIEC AND PETER E. HILDEBRAND
(Revised June 1995)









EVALUATION CRITERIA IN THE ANALYSIS OF TECHNOLOGICAL ALTERNATIVES
FOR LIMITED-RESOURCE, FAMILY FARMERS



OUTLINE

1. Identifying Relevant Evaluation Criteria
a. Land as a Scarce Resource
b. Labor as a Scarce Resource
c. Cash as a Scarce Resource
d. Considerations Related to Risk
e. Considerations Related to Other Farm-Household Activities
2. Weighing the Importance of Different Criteria
3. Choosing Appropriate Economic Analysis Techniques.


LEARNING OBJECTIVES: After reading this handout students will be able to:

1. Explain why it is important to gain a close understanding of farmer perspectives and
circumstances when identifying evaluation criteria for analysis of technological
alternatives.

2. Identify evaluation criteria for analysis of on-farm research relevant to different
stakeholders and situations in farm production.

3. Explain why it is important to consider risk when evaluating alternatives to current farming
practices and discuss several factors influencing variability in yields, costs, prices and
farmer practices which influence risk.

4. Explain at least five factors to consider when choosing appropriate economic analysis
techniques for evaluating technologies.

KEY POINTS

Selecting evaluation criteria which are relevant to different farm-household and individual
goals and perspectives is critical. Poorly chosen evaluation criteria lead to wrong conclusions
about the viability of the alternatives being compared.

Different stakeholders in farm production judge proposed changes in farming practices by
different evaluation criteria.

Risk, or the chance that returns might fall below some minimum acceptable level, is faced
by all farmers. Likewise, risk must be considered by every researcher or extensionist who
evaluates alternative technologies and who makes recommendations to farmers.













DEFINITIONS

Evaluation criteria: Measures by which we assess the acceptability to select between two or
more alternatives. In the context of this course, we are considering the evaluation of
technological alternatives. In the farmer's context, one of these alternatives will usually
be the present practice.

Ex-ante evaluation: Evaluation of the expected biological, economic and/or social benefits of
alternative technologies prior to testing them through on-farm research.

Ex-post evaluation: Evaluation of the biological, economic and/or social benefits of alternative
technologies after testing them in on-farm research, in order to make decisions about
further testing and adaptation and/or to make technology recommendations for farmers.

Risk: Probability of returns from a farm production activity falling below some minimum
level acceptable to farmers.

Stakeholders: Individuals who participate in a crop or livestock production activity or who are
affected by the outcome. Three major types of stakeholders are decision-makers,
investors and beneficiaries.

1. IDENTIFYING RELEVANT EVALUATION CRITERIA

An ample understanding of farm household goals, incentives, farming and non-farming
activities, available resources and constraints is the foundation upon which to build the analysis
of alternative technologies. Given this understanding, and full farmer participation, appropriate
evaluation criteria and procedures for analysis can be selected. Although rarely is this insight
easily achieved, the usefulness of economic analysis depends upon doing so. Pnorly chosen
evaluation criteria lead to wrong conclusions ahout the viability of the alternatives heing
compared.
Identifying appropriate evaluation criteria for analyzing the performance of alternative
technologies is a critical step. Evaluation criteria are biological, economic or social measures
used to assess the acceptability of two or more alternatives. Appropriate criteria relevant to
farmers must be identified. These criteria provide a basis for comparing farmer practices with
proposed alternatives and for evaluating the results of each.
Careful researchers and extensionists begin to identify farmers' criteria by considering each
stakeholder's perspective and priorities within the overall framework of the household. Key
factors to understand when deciding upon evaluation criteria include the following:
goals of the household and of individual stakeholders
scarce resources










probability of returns being less than a minimum acceptable level (risk)
control and distribution of inputs and benefits
possible effects on other enterprises and on overall house hold production,
consumption, and welfare. Clearly, more than a single evaluation criterion may
be required.

a. Land as a Scarce Resource
The most common evaluation criterion used by agronomists is yield per unit of land area,
frequently kg/ha. The use of this criterion implies that land is the most limiting resource on the
farm and therefore that productivity of the land is the most important evaluation criterion. This
is not always the case. On many small farms, even though there is little land, land is not the
most limiting constraint. Nor is the same constraint necessarily the most limiting for different
crops.
For example, small farmers in Narifio, in the south of Colombia, traditionally plant their
scarce potato seed by spacing it widely to maximize the productivity of each potato seed. The
amount of seed determines the size of the potato field. Hence, land is not the most limiting
resource with respect to potato production on these small farms. However, the rest of the land
on these farms was planted into grain crops. For grain, land and not usually seed is a limited
resource in this area. For this reason, in the case of potatoes, technological changes that
increase the productivity per unit of land area but decrease the productivity per unit of seed
(kg/kg seed), such as higher plant populations will not be attractive to these farmers. On the
other hand, the same kind of technology for grain crops could be acceptable. The importance
of using a relevant criterion in evaluating on-farm trials is obvious in this case.

b. Labor as a Scarce Resource
In some areas of Africa, land is not yet a limiting resource. Farmers can plant as much
land as they are able to manage. However, in these same areas, rainfall is scarce so weeding
the crops becomes a critical factor. These farmers tend to plant the amount of land they can
effectively weed because planting more land is a waste of effort if it cannot be weeded. In this
case, labor for weeding becomes an important evaluation criterion and changes in crop
production practices must also be evaluated against this factor. An appropriate criterion might
be kg/person-day in weeding.
In some areas, such as in eastern Guatemala, crops must be planted as soon as possible
after the initiation of the rains. Delayed planting reduces yield heavily because of a mid-season
dry spell, increased pest problems, or because the crop does not mature before the rains
terminate. In this case, labor available for planting is the scarce resource and kg/person-day
in planting becomes a very important criterion.

c. Cash as a Scarce Resource
In commercialized agriculture, cash can effectively substitute for most other inputs. If
more seed is needed, it is purchased with cash (or credit, another form of cash). If more labor
is needed, it is also purchased with cash. However, in many small, limited-resource farm
situations, cash is scarce and not readily obtainable.










probability of returns being less than a minimum acceptable level (risk)
control and distribution of inputs and benefits
possible effects on other enterprises and on overall house hold production,
consumption, and welfare. Clearly, more than a single evaluation criterion may
be required.

a. Land as a Scarce Resource
The most common evaluation criterion used by agronomists is yield per unit of land area,
frequently kg/ha. The use of this criterion implies that land is the most limiting resource on the
farm and therefore that productivity of the land is the most important evaluation criterion. This
is not always the case. On many small farms, even though there is little land, land is not the
most limiting constraint. Nor is the same constraint necessarily the most limiting for different
crops.
For example, small farmers in Narifio, in the south of Colombia, traditionally plant their
scarce potato seed by spacing it widely to maximize the productivity of each potato seed. The
amount of seed determines the size of the potato field. Hence, land is not the most limiting
resource with respect to potato production on these small farms. However, the rest of the land
on these farms was planted into grain crops. For grain, land and not usually seed is a limited
resource in this area. For this reason, in the case of potatoes, technological changes that
increase the productivity per unit of land area but decrease the productivity per unit of seed
(kg/kg seed), such as higher plant populations will not be attractive to these farmers. On the
other hand, the same kind of technology for grain crops could be acceptable. The importance
of using a relevant criterion in evaluating on-farm trials is obvious in this case.

b. Labor as a Scarce Resource
In some areas of Africa, land is not yet a limiting resource. Farmers can plant as much
land as they are able to manage. However, in these same areas, rainfall is scarce so weeding
the crops becomes a critical factor. These farmers tend to plant the amount of land they can
effectively weed because planting more land is a waste of effort if it cannot be weeded. In this
case, labor for weeding becomes an important evaluation criterion and changes in crop
production practices must also be evaluated against this factor. An appropriate criterion might
be kg/person-day in weeding.
In some areas, such as in eastern Guatemala, crops must be planted as soon as possible
after the initiation of the rains. Delayed planting reduces yield heavily because of a mid-season
dry spell, increased pest problems, or because the crop does not mature before the rains
terminate. In this case, labor available for planting is the scarce resource and kg/person-day
in planting becomes a very important criterion.

c. Cash as a Scarce Resource
In commercialized agriculture, cash can effectively substitute for most other inputs. If
more seed is needed, it is purchased with cash (or credit, another form of cash). If more labor
is needed, it is also purchased with cash. However, in many small, limited-resource farm
situations, cash is scarce and not readily obtainable.










probability of returns being less than a minimum acceptable level (risk)
control and distribution of inputs and benefits
possible effects on other enterprises and on overall house hold production,
consumption, and welfare. Clearly, more than a single evaluation criterion may
be required.

a. Land as a Scarce Resource
The most common evaluation criterion used by agronomists is yield per unit of land area,
frequently kg/ha. The use of this criterion implies that land is the most limiting resource on the
farm and therefore that productivity of the land is the most important evaluation criterion. This
is not always the case. On many small farms, even though there is little land, land is not the
most limiting constraint. Nor is the same constraint necessarily the most limiting for different
crops.
For example, small farmers in Narifio, in the south of Colombia, traditionally plant their
scarce potato seed by spacing it widely to maximize the productivity of each potato seed. The
amount of seed determines the size of the potato field. Hence, land is not the most limiting
resource with respect to potato production on these small farms. However, the rest of the land
on these farms was planted into grain crops. For grain, land and not usually seed is a limited
resource in this area. For this reason, in the case of potatoes, technological changes that
increase the productivity per unit of land area but decrease the productivity per unit of seed
(kg/kg seed), such as higher plant populations will not be attractive to these farmers. On the
other hand, the same kind of technology for grain crops could be acceptable. The importance
of using a relevant criterion in evaluating on-farm trials is obvious in this case.

b. Labor as a Scarce Resource
In some areas of Africa, land is not yet a limiting resource. Farmers can plant as much
land as they are able to manage. However, in these same areas, rainfall is scarce so weeding
the crops becomes a critical factor. These farmers tend to plant the amount of land they can
effectively weed because planting more land is a waste of effort if it cannot be weeded. In this
case, labor for weeding becomes an important evaluation criterion and changes in crop
production practices must also be evaluated against this factor. An appropriate criterion might
be kg/person-day in weeding.
In some areas, such as in eastern Guatemala, crops must be planted as soon as possible
after the initiation of the rains. Delayed planting reduces yield heavily because of a mid-season
dry spell, increased pest problems, or because the crop does not mature before the rains
terminate. In this case, labor available for planting is the scarce resource and kg/person-day
in planting becomes a very important criterion.

c. Cash as a Scarce Resource
In commercialized agriculture, cash can effectively substitute for most other inputs. If
more seed is needed, it is purchased with cash (or credit, another form of cash). If more labor
is needed, it is also purchased with cash. However, in many small, limited-resource farm
situations, cash is scarce and not readily obtainable.










On farms where farmers are unaccustomed to making purchases with cash, great care must be
taken to evaluate the return to the additional amount of cash required for alternative
technologies. A relevant criterion would be kg/$ cash cost.
On fully commercial farms, where cash is basically not a limiting factor, the criterion of
profit maximization may be relevant. Maximimum profit per ha or per farmer is achieved
when the value of the product obtained from the last unit of input used is just equal to the cost
of that additional unit. However, farmers with very limited amounts of cash will not usually be
interested in using as much cash in a single enterprise as is required to maximize profit. Rather
they will be looking for ways to achieve the highest return per unit of cash invested. In this
situation, the amount of product per unit of cash (kg/$ cash cost)is a relevant criterion.
Because cash can be converted into many different kinds of inputs, it is more critical to
look at alternative uses for it, especially on small farms where family necessities compete
directly for limited cash resources. If researchers or extensionists consider only return to cash
investment in the commodity in which they are interested, they may well find that what
appears to be a "good" technology is not acceptable to farm families who would rather use the
cash for a wedding or to repair the house.

d. Considerations Related to Risk
Often the measures used in field research are based on averages. It is common, for
example, to consider the difference between mean yields of two or more treatments from a
trial or experiment. Techniques in biological analysis such as analysis of variance are used to
determine if the mean yields of two or more treatments are really different. In Figure 1,
"Examples of Evaluation Criteria at the Enterprise Level, criteria listed under the subheading
"Returns To Scarce Resources" are also averages.
If only means or averages are used and risk is not taken into account, it is easy to assign a
single value to, for example, net income per hectare as a measure of return to land. Average
yield of a treatment is multiplied by a single estimate of price and this is considered as gross
income. Too often this is done even when special care has been taken to use replicated trial
designs to provide estimates of variance for crop yield. Even when an attempt is made to
record all inputs and other costs of production, only a single value is used for the prices or
costs of different inputs. This provides a single estimate of the cost of production to subtract
from the single estimate of gross income. The difference between the gross income and the
cost of production provides a single estimate of net income per hectare.
But, with everything that can go wrong in crop and livestock production, a farmer might
easily obtain a net income that is much lower than the single, average value calculated above.
If researchers and extensionists do not consider all sources of variation and attempt to assess
the risk farmers would face in using a proposed practice, they are conducting an incomplete
evaluation. Even worse, they may be misleading farmers If they recommend a proposed
practice or technology based on such an incomplete analysis.
Means or averages are useful beginnings, but do not tell the whole story. Farmers also
want to know what are the chances that their yield or income may fall below some minimum
acceptable level if they adopt an alternative to their present practice. In other words, how risky
is it?










In focusing on evaluation of technological alternatives, "risk" can be considered as the
probability of returns from a farm production activity falling below some minimum level
acceptable to farmers. Risk, as defined here, is evaluated by all farmers within the scope of
their individual farm settings. Field researchers and extensionists must consider aspects of risk
for farmers as a group, as well as risks associated with individual farms.
Risk, as considered hy individual farmers, arises from variability and change they face and
is related to their individual farm setting. Specifically, some facets of variability considered by
farmers when they make their estimates of riskiness include;
1. changes in yield or product quality which happen over time even when farming practices do
not change;
2. changes in farming practices over time
a. changing input quality or availability
b. changing rates or times of application
c. changing cultivars
3. changes in the prices of inputs due to
a. seasonal variation
b. inflation or various cycles over longer time periods
c. other factors such as government policy changes
4. changes in prices received for products due to
a. seasonal variation In prices
b. inflation or various cycles over longer time periods
c. other factors such as government policy changes

Changes related to 1) come about because of bioclimatical effects that differ from year to
year. These are beyond the control of farmers. But, with their years of local experience
farmers have a feel for the extent of these effects. Changes related to 2) are a result of
differences in management, the human factor. Farmers usually have a good idea of the
expected results of changing their practices before they do so. However, there remains the
possibility that they were mistaken and that the changes might produce negative outcomes.
Changes related to 3) and 4) result from economic conditions mostly or completely beyond the
control of farmers. However, they are aware of previous trends in costs and prices and use this
awareness to estimate risk. Researchers and extensionists must consider all these factors
contributing to variation within a single farm setting when assessing alternatives.
At the same time, field researchers and extensionists must include variation among farmers
in an area in their considerations. Different farmers often use very different practices in
growing the same crop. Costs of inputs vary greatly among farmers depending upon their
distance from a source of supply, transportation available and what balance of farm produced
versus purchased inputs they use. Prices received by different farmers vary according to
factors such as product quality, time of marketing, and distance from market.
Figure 1 lists some evaluation criteria that might be used under various circumstances to
compare the economic benefits of alternative technologies and farmer practices. This listing is
not complete, but is limited primarily to the enterprise level of analysis from a short-term
change perspective. As might be inferred from Figure 1, economic benefits can result from










yield increases, reduction in cost, decreased use of other scarce resources, reduced drudgery of
tasks, enhanced product quality, stability In production and/or improved distribution of
outputs.

FIGURE 1.

EXAMPLES OF ECONOMIC EVALUATION CRITERIA USEFUL AT THE ENTERPRISE
LEVEL OF ANALYSIS

STAKEHOLDER APPRAISAL:

Assessment of acceptability to each type of stakeholder.
Adoption by relevant stakeholders

RETURNS TO SCARCE RESOURCES:

Returns/unit of labor at planting, weeding, harvest, etc. Returns/unit of land Returns/unit of
seed Returns/unit of cash Returns/unit of long term capital investment Returns/animal/day for
traction Returns/unit of land/unit of time

RISK

Probability of receiving less than a certain minimum level of return acceptable to farmers.
Measured using any of the relevant criteria under the "Returns to Scarce Resources" heading
above.

DISTRIBUTION OF COSTS AND BENEFITS:
disaggregatedd by age, gender, position, and/or household type)

Labor Management time Variable cash Variable noncash inputs (seed, manure, etc.) Returns
(benefits) received

PRODUCT QUALITY:
(related to market price and/or household utility)

Consumption preferences (taste, size, color, shape, etc.) Susceptibility to preharvest pest
damage Storability and susceptibility to postharvest pest damage Processing quality Cooking
quality Nutritional quality

Note: some of these criteria may be more suited to evaluation by monitoring activities over
time rather than by analysis of trial data.










e. Considerations Related to Other Farm-Household Activities
Often secondary effects from introducing alternative technologies occur in other enterprises
on the farm not directly involved in the change. For example, fruit production from an orchard
might be increased by controlling.weeds, but those weeds would then be unavailable for
livestock grazing. Increasing the planting density of one crop in an intercropping situation
might decrease the yield of a second crop.
The suitability of changing a farm practice is often seen in a different light when viewed in
respect to the overall production, consumption and welfare of the household. If the amount of
a resource used In a farm enterprise is to be increased by a proposed alternative, where will
that increase-come from? How will that affect the activity where it is presently used? For
example, a recommendation to use additional manure in cropping to gain better yields might
conflict with the need for manure as fuel for cooking.
If use of a resource in a farm enterprise is decreased by a proposed change, where and how
will that freed resource be used? How will that increased input affect the activity where it will
be used? A recommendation to increase the planting density of a grain crop might decrease the
amount of land needed to obtain a given yield. If the freed land remains unused because time
is not available to manage a new enterprise on it, the change may have increased the amount of
land in fallow. If the freed land is used to increase plantings of another crop, how will the new
plantings affect the overall costs and benefits to the household? Who among the household
members will have to invest additional management time, labor and capital, and who will
receive the various returns from the new crop?

2. WEIGHING THE IMPORTANCE OF DIFFERENT CRITERIA

With such a variety of potential economic criteria, how can researchers and extensionists
identify those most crucial to the evaluation? One consideration in weighing and ranking
criteria is significance to each stakeholder. Continuing dialogue with principal stakeholders is
essential. Observing roles and questioning each relevant stakeholder; male farmer, female
farmer, head of household, homemaker, older adult, youth and so on, will provide feedback
on the importance and suitability of specific criteria to each of them. Directed questioning
about proposed changes in farming practices also assists in pinpointing possible effects on
other enterprises and overall household welfare.
Economic evaluation criteria do not stand alone in analysis of technological alternatives.
Non-economic criteria from the biological and social realms are also essential pieces of the
technology evaluation puzzle. Economic questions and issues cannot be examined apart from
biological and social concerns. Suitability to local climate and soils, compatibility with local
culture and social arrangements, yield sustainability, pest factors and ecological sustainability
are a few of many areas where biological or social evaluation criteria are sequential.

3. CHOOSING APPROPRIATE ECONOMIC ANALYSIS TECHNIQUES

The process of choosing the most appropriate economic techniques for analyzing the
performance of alternative technologies involves contemplating a number of questions related
to the evaluation criteria to be used, to project concerns, and to the characteristics of the
techniques themselves:











What economic evaluation criteria will be used?
Will this be an ex-ante or ex-post evaluation of the proposed technologies?
What type of on-farm trial is to be analyzed?
How ready is the technology for recommendation to farmers?
How timely and complete must the analysis be?
What clientele groups will use the results of the analysis? (farmers, field team, station
researchers, policy-makers)
What source and types of data are available or required?
What is the level of economic expertise of the personnel who will conduct the analysis?

The specific techniques covered in this paper are only part of a larger number of economic
evaluation tools which also includes sensitization to the perspectives of different stakeholders,
ongoing personal observations, communication with farmers, more sophisticated economic
data analyses at the whole farm level, and monitoring of adoption effects on farm households.


5167/Econanal




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