Market-Based Incentives for Conserving Diversity on Farms: The Case of Rice Landraces in Central Tarai, Nepal Devendra Gauchan University of Birmingham, UK and In Situ Agrobiodiversity On-Farm Project Nepal (NARC/LIBIRD/IPGRI) Presented at BIOECON Conference, Venice, Italy, 28-29th August 2003

Presentation Outlines Background to study Market Incentives & Crop Genetic Diversity Research Methods Findings: Market share, market channels, price and margin analysis and Market Participation Summary and conclusions Implications for policy and research

Background to Study Rice-a globally important food crop & also for Nepal Landraces- sources of global crop genetic diversity and livelihood security for farmers in agroecosystems Markets can provide signals for farmers decisions to maintain or abandon diverse landraces (LR) Markets if function well, could be cheapest instruments to conserve agrobiodiversity on-farm However, so far, market studies have focused mainly modern varieties (MV)- studies on market and policy incentives & disincentives to maintain landraces are lacking

Rice Varietal Diversity Landrace-Late maturing Landrace-Early maturing Landrace Intermediate

Market Incentives and Issues Markets may be “thin” for LRs; Price signals may be limited use to provide incentives to cultivate Markets may function poorly- farmers produce for own consumption affecting choice of varieties The attributes that farmers demand for production & own consumption may not be recognised and valued by other consumers Price premium may not transmit consumer demand for quality when attributes are not transparent

Market & Policy Incentives & Disincentives Technological change, with development of markets provide incentives for Modern Varieties over Landraces. Input markets biased to MVs with direct seed subsidies or hidden subsidies on other inputs (e.g. fertilizers). Information problems inherent in new seed technology biased for MVs through public extension & trainings Asymmetry of information and poor flow of market information in landraces.

Case Study Purpose Advance scientific understanding of the incentives the farmers have to grow landraces as the market environment changes in Nepal Study premise: If the superior traits of landraces recognised and valued in markets - they could deliver incentives in the form of price premiums

Map of Nepal and Study Site Bara Ecosite Terai

Research Methods Baseline household survey of farmers (N=202) Key Informant Survey, Focus groups and other Informal methods (e.g. direct observation) Market channels, market actors & product flow Marketing costs and Margin Analysis Market price analysis: Price Differentials between LR and MV and Within LRs

Market Channels Producer-Sellers Local market intermediaries: Golas, Bania, Kutuwa, Paldar, Kawarni etc. Small-scale local processors e.g. custom mills Large scale trader processors e.g. Millers(de-huskers) Exporter /importer of milled rice, parboiled rice Wholesalers of milled rice Retailers Local farmer & urban consumers

Market Channels & Practices Small scale traders Collection point at Gola-Large-scale traders

Rice Market and Landraces Less than half of the households sell rice Farmers grow 53 varieties of which, 33 are LRs Two landraces were formally traded in market Market recognises only phsically observable quality i.e coarse and fine grain types Many coarse LRs traded informally in small scale irregularly and are of heterogenous grain types Fine grain aromatic Basmati LR traded in formal market in small scale

Market Shares for Landraces

Market Price and Margin Analysis Price Differentials between LR & MV high and observable for some landraces The ratio of average farmgate and market price to those of similar MVs for Basmati LR is > 1 whilst for the coarse grain Mutmur LR < 1 Coarse grained landraces considered poor quality in formal market & lower margins and profits Though profit margins for local Basmati-fine landrace is high, its market is affected by the supply of cheaper Basmati from across the border

Market Participation & Rice Diversity Farmers selling rice have larger farm, more literate and wealthy as compared who donot sell rice Farmers selling rice grow more no of varieties both LRs and MVs & have larger area in MVs Higher % of farmers selling rice maintain more combination of LRs & MVs Farmers growing marketable landraces (Basmati) were “better off” with less off-farm work

Varietal Ratings for Attributes Inferior physical attribute is valued in market but not their superior agronomic attributes Basmati rated higher for consumption but low for agronomic attributes Coarse grained LRs Mutmur rated higher for agronomic attributes but lower for consumption

Disincentives to Landraces Landraces face disincentives both from market and policy environments Market development favouring modern varieties (MV) over landraces Seed and input subsidies directed to MVs Public funded extension and training support given for only MVs

Summary and Conclusions Mostly informal and “thin” market for landraces Superior Traits in LRs are not recognized in market - except consumption traits of aromatic varieties Price signals for many landraces are not generally transmitted from consumer to producers Farmers growing Basmati landrace are “better off” than other landraces growers In contrast to coarse types, market incentives for high quality aromatic Basmati landrace is high.

Implications for Research & Policy Value addition & market linkage of landraces with high social value is needed However, further analysis of costs and benefits- before specific mix of policy intervention Not all the landraces are equal: Market dev. & incentives may favour one landrace to other types The tacit assumption that the poor who maintains rice landraces needs further empirical work The genetic contribution of landraces types is unknown; if poor maintain unqiue alleles, then there may be trade off in efficiency vs equity. THANK YOU

Market Price and Marketing Margin LRs=Mutmur & Basmati; MVs=China-4 & Sabitri

Rice Variety Choices and Market Participation (*)Pairwise T- Test & (+) Chisquare Test significant (P< 5%) level

Wealth, Farm Size, Literacy &Market Participation (*)Pairwise T- Test & (+) Chi-square Test significant (P< 5%) level

Sauce-Economic Status of Growers of Basmati & MVs (*)Pairwise T- Test & (+) Chi-square Test significant (P< 5%) level