EFFECTS OF CLIMATE THRESHOLD ON SELECTED ARABLE CROP PRODUCTION AND POTENTIAL FOR WEATHER-INDE INSURANCE IN GUINEA-SAVANNAH, NIGERIA

Abstract

This study was to examine the effects of Climate Threshold on selected Arable Crop Production and Potential for Weather-Index Insurance in Kwara and Niger State, Guinea-Savannah, Nigeria. Cross-sectional and time series data were used for this study. A multistage sampling procedure was employed to select 320 respondents (Maize and Sorghum Farmers) for the study. The analytical tools used in the study are Descriptive Statistics, J-P (Just and Pope) Production Function Model, Growth Function Analysis, Growing Degree Days (GDD), Auto-regressive Distributed Lag (ARDL) Model and Discrete Choice Analysis (Mixed Logit) Model. The result from the Just-Pope Production Model revealed that quantity of sorghum seed, quantity of fertilizer, proportion of family labour on farm activities and farm size increased the yield variance of the sorghum farmers. Quantity of seed and fertilizer increased the yield risk of maize farmers in the study area. Maize yield had a positive growth rate of 3.8% while sorghum yield had a positive growth rate of 2.4% in the period under consideration. Further, the results of the analysis on the climate variables revealed that temperature increased the yield risks of sorghum and maize farmers in the study area even though the effect was not too severe on maize yield. There was deceleration in the growth of maize and sorghum yield. The GDD was observed to reduce yield risk for maize and sorghum. Thus, an increase of one GDD unit induced yield increase in the two states under consideration. However, as expected, the effect of increased extreme temperature measured with Harmful Degree Day (HDD) on maize and sorghum yield was negative. These results reinforced the hypothesis that extreme weather is an important limiting factor of crop growth, particularly in North central, Nigeria. The results of long run estimates showed that temperature and rainfall had a positive and negative significant influence, respectively, on maize and sorghum yield in the long run. The study also revealed that Error Correlation Model (ECM) in this study is statistically significant at 1% level and had a value of -0.0511 and -0.0701 for maize and sorghum yield respectively. The implication of this is that about 5.11% and 7.01% of disequilibria in maize and sorghum enterprise respectively from the previous year’s shock converge to the long-run equilibrium in the current year. The choice experiment revealed a negative coefficient for Alternative Specific Contract (ASC), suggesting that the crop farmers in the study area had positive attitude toward weather index insurance. The coefficient of premium rate also had a negative value which means that farmers prefers low price insurance contract to a higher price insurance contract when other insurance attributes are held constant. On the average, farmers were willing to pay about 5.7 percent of their expected harvest for an insurance contract. This revealed that moderate reduction in premium paid by farmers could probably increase their choice of Weather Index Index (WII) significantly. Therefore, premium rate should be made flexible and affordable to small holder farmers.