Adoption of Agricultural Technology under Production Risk: A Case Study of Wheat in Fars Province

This paper investigates the effects of wheat production risk and other socio-economic factors on the probability of adopting new seed technologies. Also, the effects of production inputs and production conditions are examined on wheat production yield and risk. Moreover, the relative risk of new seed varieties will be examined under different scenarios. To carry out the study, farm-level data was collected from a sample of 187 wheat farms located in Fars province, and selected by multi stage random sampling method during the years 2001 and 2002. A generalized stochastic production function by a three-stage estimation procedure was used to determine the influential factors on the production yield and risk. The results showed that yield uncertainty could not be sufficiently explained by the level of input use in the cultivation of both wheat varieties. The comparison of two wheat varieties cultivation indicated that in the absence of suitable production conditions, on the average, the cultivation of new wheat varieties ensures greater yield than traditional wheat varieties, but involves greater risk, as measured by yield variance. Accordingly, the farmers’ risk aversion attitude could be a major factor inhibiting speedy diffusion of new wheat varieties, which besides having greater average yield than traditional wheat varieties, it has less production risk. The results indicated that the risk associated with seed has negative effect on the adoption of new seed technologies.