Demographic influences on willingness to pay for cold tolerance technology.

Recent technological improvements in agriculture have greatly increased yield and output and reduced the labor required by the industry. Technologies in machinery, biotechnology, and precision agriculture, along with many other fields, have greatly improved efficiency and increased food availability. However, before these technologies can benefit either society at large or the agricultural community, producers must decide to make use of them. Numerous factors interact to determine whether a particular producer or segment of producers will incorporate a technology into their operation. Knowledge of these factors is very useful to those developing new technologies and attempting to predict demand levels and effects on industry. Some categories of influencing factors include farm manager demographics, industry conditions, risk factors, and macroeconomic and policy issues.

In an undergraduate study at the University of Alberta, the likelihood of adoption and willingness to pay for more frost-tolerant wheat varieties was examined. Researchers from University of Saskatchewan, University of Alberta, and other partnering organizations are working to improve the low-temperature tolerance of cereal crops commonly grown in Western Canada. This could reduce risk of crop failure or poor crop quality for many producers and also expand cereal crop production to areas currently considered marginal or nonagricultural land (Genome Prairie 2006).

With many fluctuations in climate conditions, cold-tolerant cereal grain technology has great potential in Alberta. Short growing seasons, unpredictable weather, and limited rotations make the benefits offered by more cold tolerance varieties significant. In 2005, wheat was the field crop accounting for the highest acreage and the highest farm receipts in Alberta, at 6.6 million acres and $787 million in receipts. This accounts for over one-third of Alberta crop receipts (Alberta Agriculture and Food 2006). This is why current research is strongly focused on wheat.

If a crop experiences frost damage during the normal growing season or because the crop requires a very long growing season, producers can suffer economic losses. For example, a frost early in the year can completely destroy a crop, while later frosts can reduce the yield and grade of the end product, resulting in wrinkled kernels, higher green seed content, or grain that spoils easily. This is why many crop breeders focus on increasing frost tolerance (FT) and decreasing days to maturity. If the crop takes fewer days to reach harvest, the risk of frost exposure is lower.

Adopting more frost-tolerant cereals could expand rotational options for producers on the edge of wheat growing areas and increase the amount of food produced on the limited agricultural land base. More frost-tolerant varieties can be seen as a risk management tool for wheat producers, as they reduce the risk of lower quality and yield, both of which are very costly problems. As these new cold-tolerant varieties are developed and move toward commercialization, information on the number and type of producers who may be willing to invest in this technology can be used in focusing upcoming development and marketing efforts.

Objectives

The goal of this project was to gauge the level of demand and willingness to pay for increased tolerance to inclement temperatures, either through higher frost tolerance of the plants or through decreased days to maturity. By determining the number and type of cereal producers interested in frost-tolerant varieties, decisions on production levels, pricing and promotion can be made more effectively.

Previous Work

There has been previous research and discussion on the factors that influence farmers and other business operators to adopt new technologies. Although these studies did not directly examine improvements in low-temperature tolerance in cereal crops, the methods and findings of other researchers provided a basis for this project's hypothesis and a point of reference when evaluating the findings.

Karshenas and Stoneman (1993) looked at technology adoption in an industrial rather than agricultural setting. They examined the cost benefit equilibrium that must be reached before a firm manager makes the decision to invest in new technology. They reported that the decision to adopt new technologies came sooner for larger firms and those expanding rapidly. This conclusion is closely related to the idea of economies of scale. This idea is not as important for cold-tolerant varieties as it is for other technologies, as seed can be bought in small lots, and the initial investment required to try the seed is not large. This may lead to a higher propensity to adopt, even by smaller firms, than would be seen for a technology requiring a large capital outlay.

Koundouri, Nauges, and Tzouvelekas (2006) looked at adoption of more efficient irrigation technology in Greece. In this case, observed behavior was used rather than stated choice. Younger, more educated farm operators were more likely to make use of the new technology. It was also noted that those with smaller operations, but more profit per unit of land than average were more likely to adopt. This could be because the use of irrigation equipment is labor intensive and time-consuming, so it is more appropriate for small, intensive operations. Operations in geographic areas with worse environmental conditions were more likely to make use of the technology. The authors see these producers located in areas that frequently experience drought and hence are more likely to make the investment in irrigation technology, as the marginal benefit was higher for them.

Saha, Love, and Schwart (1994) examined the characteristics of dairy producers adopting the use of bovine growth hormone in the United States. Early adopters were characterized as being younger and from larger operations. Higher education levels and larger dairy herds also had a significant positive impact on the degree to which the technology was adopted.

After considering the nature of the technology studied and the findings of past research, it was hypothesized that younger, larger more educated farmers would be more likely to adopt this cold tolerant new technology. Those with higher income levels were also expected to have a higher propensity for adopting the new technology. It was also expected that those from marginal agricultural areas with more variable weather would have a higher interest in the new technology. It was expected that willingness to pay would rise with the increased level of frost tolerance or decreased days to maturity.

Methods

In order to determine willingness to pay for new varieties with improved resistance to cold temperatures, a research project with a number of stages was designed. First, a written survey was designed to gather primary information from Alberta producers. The survey included sections on previous adoption behaviors, past experiences with frost damage, and factors influencing the decision to adopt a new technology or variety. Both "yes" or "no" questions and attitudinal scales were used in the survey. The attitudinal questions focused on risk aversion and innovation levels of the participant. Demographic characteristics were also measured. The final section of the survey asked participants to choose between their existing wheat variety and one with improved frost tolerance and/or decreased days to maturity. The three attributes altered in this dichotomous choice section were increase in seed cost (SC), (DD), and degrees increase in FT. There were 16 dichotomous choice questions in total, and each participant was asked to answer eight of these choices. Every combination of traits was used except for those with no improvement in either time to maturity or frost tolerance. The variations used were: a 0, 2, or 4 day DD; an increase in FT of 0, 2, or 4 degrees Celsius; and an increase in SC of 25 or 50%. A sample of these questions is included in table 1.

After gaining human ethics approval from the University of Alberta Agriculture, Forestry, and Home Economics Research Ethics board, the survey was administered in person at agricultural meetings and trade shows. A total of 104 people filled out the survey, but four left the majority of the questions blank, so they were removed prior to analysis. The majority of the 100-person sample filled out the survey at the Farm and Ranch Tradeshow held in Edmonton, Alberta, Canada, in late March 2007. Other sources were attendees at a Canola Club Root Meeting near Stony Plain Alberta and farms in the Vulcan area of Southern Alberta. This would be considered a convenience sample, as it was drawn from those who volunteered to participate and were gathered in a common place.

After gathering the raw data, it was analyzed with descriptive statistics and regression techniques to determine statistically significant relationships between the decision to adopt a new variety, choice characteristics, and demographics. Microsoft Excel and the software program time series processor (TSP) were used to accomplish this. Once the logit equation was estimated, standard procedures for logit-stated choice models were used to calculate willingness to pay for each of the desirable attributes, decreased days to maturity and increased degrees of FT were calculated for different types of respondents.

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Finally, the findings of this study were compared to the results of similar studies on technology adoption in agriculture. The ways in which the findings were either validated or confirmed by the work of others were explored.

Results

Demographics