Agricultural Technology Assessment for Smallholder Farms in Developing Countries: An Analysis using a Farm Simulation Model (FARMSIM)

The rural population in developing countries depends on agriculture. However, in many of these countries, agricultural productivity remains low with episodes of famines in drought-prone areas. One of the options to increase agricultural productivity is through adoption and use of improved agricultural technologies and management systems. Being a relatively high risk business due to factors related to production, marketing and finance, agriculture requires to devise risk mitigating strategies. Several models used to evaluate the adoption of agricultural technologies focus mainly on assessing the ex-post impact of technology without necessarily quantifying the profit and risk associated with the adoption of technologies. This paper introduces a farm simulation model (FARMSIM) that attempts to evaluate the potential economic and nutritional impacts of new agricultural technologies before they are adopted (ex-ante). FARMSIM is a Monte Carlo simulation model that simultaneously evaluates a baseline and an alternative farming technology. In this study, the model is used to analyze the impact of adoption of small scale irrigation technologies and fertilizers on the farm income and nutrition of smallholder farmers in Robit kebele, Amhara region of Ethiopia. The farming technologies under study comprise water lifting technologies (pulley and tank, rope and washer pump, gasoline/diesel motor pump and a solar pump) and use of fertilizers. The key output variables (KOVs) are the probability of positive annual net cash income and ending cash reserves, probability of positive net present value and a benefit cost ratio greater than one. For nutrition, the KOVs relate to the probability of consumption exceeding average daily minimum requirements of an adult for calories, protein, fat, calcium, iron, and vitamin A. The application of recommended fertilizers on grain and vegetable crops, alongside the use of irrigation to grow vegetables and fodder using a motor pump had the highest net present value compared to other scenarios. Similar results were observed for the net cash farm income and the ending cash reserves. However, the most feasible and profitable scenario is the one under the pulley system which had the highest benefit cost ratio. Solar pump system had the lowest benefit cost ratio due most likely to high initial investment cost. As for the nutrition, the simulation results show an increase in quantities available to the farm family of all nutrition variables under all alternative scenarios. However, the daily minimum requirements per adult equivalent were met only for calories, proteins, iron and vitamin A but deficiencies were observed for fat and calcium.