Researchers from University of Chicago’s Energy Policy Institute studied 250 villages in Telangana, where over half the working population is engaged in farming. Information on an accurate monsoon onset date (four to six weeks ahead of time) can help farmers in India prevent losses and cut debt, according to a new research paper by Energy Policy Institute at the University of Chicago.
Researchers studied 250 villages in Telangana where more than half the working population is engaged in farming. They found that the forecast went beyond changing beliefs and had large impacts on the farmers’ investment behaviour.
The study found that overly optimistic farmers, for whom the official forecast information was not very positive—of a shorter-than-expected growing season—took steps to cut down on investments by reducing the amount of land they cultivated by 22% and were 32% less likely to add a new crop. They also reduced their expenditure by 10%, largely by cutting the amount of fertilizer they bought by 30%.
On the other hand, overly pessimistic farmers, for whom the forecast was good news and indicated the growing season would be longer than expected, increased investments. They increased the land they cultivated by 15%, were 14% more likely to add a new crop and 16% more likely to plant cash crops.
Agricultural investments informed by accurate monsoon forecasts lead to changes in agricultural outcomes and well-being, the study found. Overly optimistic farmers who reduced their farming investments saw their agricultural output and sales decline by 27% and 20%, respectively. Their agricultural profits also declined. But, these farmers also found other ways to make money and cut their debt in half, leading to an increase in net savings of more than $560 per farmer—more than 10% of total income, the paper found.
The forecast caused overly pessimistic farmers to do more farming. This led to 22% increase in agricultural production but did not qualitatively impact profits on average. The forecasts also appear to have benefited the poor the most.
Farmers who received only insurance increased the land they cultivated and the amount they spent on upfront investments like seeds and fertilizer by 12% compared to those who did not receive any forecast information. This was driven by overly-optimistic farmers, who believed it would be a better-than average year.