Title: Evaluation criteria in the analysis of technological alternatives for limited-resource, family farmers
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Permanent Link: http://ufdc.ufl.edu/UF00072231/00002
 Material Information
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
Copyright Date: 1995
 Subjects
Subject: Farms, Small -- Economic aspects   ( lcsh )
Agricultural systems -- Research   ( lcsh )
Genre: federal government publication   ( marcgt )
non-fiction   ( marcgt )
 Notes
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."
 Record Information
Bibliographic ID: UF00072231
Volume ID: VID00002
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: oclc - 76824350

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























CLASS HANDOUT

FOR

AEB 4164: MANAGEMENT OF FARMS IN TROPICAL AREAS


SPRING 1987


PREPARED BY PETER J. WOTOWIEC AND PETER E. HILDEBRAND








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 evalua-
tion criteria for analysis of technological alternatives.

2. Identify evaluation criteria for analysis of on-farm research
which are 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 of two or
more alternatives. In the context of this course, we
are considering the evaluation of technological alterna-
tives. In the farmer's context, one of these alterna-
tives 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 con-

straints is the foundation upon which to build the analysis of

alternative technologies. Given this understanding, and full

farmer participation, appropriate evaluation criteria and proce-

dures for analysis can be selected. Although rarely is this

insight easily achieved, the usefulness of economic analysis

depends upon doing so. Poorly chosen evaluation criteria lead to

wrong conclusions about the viability of the alternatives being

compared.

Identifying appropriate evaluation criteria for analyzing the

performance of alternative technologies is a critical step.

Evaluation criteria are biological, economic or social measures

which are used to assess the acceptability of two or more alterna-

tives. Appropriate criteria which are 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

criteria by considering each stakeholder's perspective and prior-

ities 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 neces-

sarily the most limiting for different crops.

For example, small farmers in Narino, in the south of Colom-

bia, 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 is planted into grain crops. For grain, land is a

limiting resource. For this reason, in the case of potatoes,

technological changes which increase the productivity per unit of

land area but decrease the productivity per unit of seed 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 a limiting resource.

Farmers can plant as much land as they are able to manage. How-

ever, 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.

In some areas, such as 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 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 which is another form of cash). If more labor

is needed, it is also purchased with cash. However, in many small







limited resource farm situation, nearly all resources used in the

production process come from the farm. Only a few inputs are

purchased. 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.

On fully commercial farms, where cash is basically not a

limiting factor, the criterion of profit maximization may be

relevant. Profit maximization is achieved when the value of the

product obtained from the last unit of input 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 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 aver-

ages. 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 ave-

rages.

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 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 resear-

chers 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 analy-

sis.

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 in

this handout, "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 by individual farmers, arises from varia-

bility and change they face which are related to their individual

farm setting. Specifically, some facets of variability consi-

dered 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
b. changing rates or times of application
c. changing cultivars








3. changes in the prices of inputs
a. seasonal variation in prices
b. over longer time periods due to inflation or various cycles
c. other factors such as government policy changes

4. changes in prices received for products
a. seasonal variation in prices
b. over longer time periods due to inflation or various cycles
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 outside

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 depen-

ding 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 ac-








cording to factors such as product quality, time of marketing, and

distance from market.

Figure 1 lists some evaluation criteria which 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 in-

ferred from Figure 1, economic benefits can result from yield

increases, reduction in cost, decreased use of other scarce resour-

ces, 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 by each type of stakeholder
verbally by each
adoption by relevant stakeholders

RETURNS TO SCARCE RESOURCES:

Returns/unit of labor at planting, weeding, harvest, ect.
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 inputs
Management time inputs
Variable cash inputs
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 techno-

logies occur in other enterprises on the farm which are not direct-

ly 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

been for naught. 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 which are 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 type of 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 wel-

fare. The generalized farming systems model used in the class

discussion of the Zambia case, is helpful in considering inter-

actions among the crop, livestock, household and off-farm compo-

nents of the system and in gauging the possible effects of changes

in farm practices.

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 bio-

logical or social evaluation criteria are essential.



3. Choosing Appropriate Economic Analysis Techniques.



The process of choosing the most appropriate economic techni-

ques for analyzing the performance of alternative technologies

involves contemplating a number of questions related to the evalu-

ation criteria to be used, to project concerns, and to the charac-

teristics 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; exploratory,
refinement or verification?

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 sources and types of data are available or required?

What analytic aids such as calculators or computers are
available?

What is the level of economic expertise of the personnel
who will conduct the analysis?

The specific techniques covered in the remainder of this

course are simplified, partial approaches to the problem of eco-

nomic analysis of alternative technologies. They are only part of

a larger bag of economic evaluation tools which also includes








tization to the perspectives of different stakeholders, ongoing

personal observations, communication with farmers, more sophisti-

cated economic data analyses at the whole farm level, and monitor-

ing of adoption effects on farm households.




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