5 Economic Risks and Uncertainties in a Context of Climate Change: Teachings on the Use of Information Systems in the Senegalese Groundnut Basin

Abstract

This chapter aims to show the benefits of systematically using information systems as a basis for agricultural decisions and strategies in the Senegalese groundnut basin. The research involved two surveys conducted by ISRA/Bame in 2016. The first, which focuses on market information, was conducted on a sample of 105 cowpea farmers who use the Yeugglé Market Information System (MIS) to obtain information on the current price in the markets of Diourbel, Bambey, and Fatick from weekly telephone messages. The second, based on a sample of 82 farmers in the regions of Diourbel, Kaolack, and Kaffrine, focuses on Climate Information (CI). The approach is based on a statistical analysis of variables related to the influence of market and climatic information on production, marketing, and agricultural input investment decisions. The results show that for 49% of farmers, market information influences their choice of markets. For most farmers (85%), market information influences the decision of sale, period, and allows farmers to make trade-offs in time and space. Regarding climate information, the results show that 67% of respondents use it and that the national meteorological service is the main provider (52%), followed by the radio (6%), and the Yeugglé platform (4%).

Keywords: Information system, risks, groundnut basin, climate change, Senegal

Introduction

In economics, “the principle of rationality means that individuals act by making the best use of the resources available to them, given the constraints they face” (Simon, 1965, ). However, the rationality of agents basing their decisions only on prices and maximizing the difference between the value of inputs and the value of outputs is not a reality. In fact, agents do not and cannot behave in a way that maximizes utility, but instead adopt strategies that consider cognitive limits (i.e., the limits encountered in the knowledge and processing of information). Rationality is therefore linked to information mastery (Fraval, 2000).

According to neoclassicists, the “market game” allows economic agents to coordinate the best possible individual decisions. Indeed, economic and social activity is often characterized by situations where the well-being of an economic agent depends, not only on their own actions, but also on the decisions of other agents. Being aware of the existence of this type of interdependence, everyone takes it into account and incorporates it into their decision-making (Fraval, 2000).

In the agricultural sector, production and marketing decisions are often dependent on the level of information available to farmers. For that reason, Senegal, like most of the countries in the Sahel, has had a few Market Information System (MIS) experiments beyond that of the Food Security Commission (CSA), which was set up in the 1980s. These MISs, both public and private, do not all have the same objectives or targets. The channels and frequencies of information dissemination may differ as some use traditional channels (e.g., radio, word of mouth) while others use second generation channels to transmit information through the website and/or cell phone.

In the groundnut basin of Senegal, cowpea producers use the Yeugglé¹ MIS to obtain information on the product’s price. This MIS, like others, broadcasts weekly information on cowpea prices in the markets of Diourbel, Bambey, and Fatick via telephone short message services (SMS). It is managed by the cowpea sector table set up by the Support Program for Agricultural Sectors (PAFA). Like other MIS’s, cowpea prices are collected weekly at urban and rural markets (Ngom, 2018).

Another experiment was developed on a large scale in the Groundnut Basin (which includes Diourbel, Fatick, and Kaffrine) in 2016 on the use of Climate Information (CI) and the impacts that it could have on farm management and more specifically on securing income. To this end, representatives of the PAFA network attended a training session on the concept of climate-smart agriculture with a particular focus on climate products.

This information impacts producers’ production and marketing decisions, even if they also face the risk and uncertainty inherent in agricultural activity. Indeed, risk and uncertainty are two fundamental notions for understanding the strategies of rural households in Sub-Saharan Africa, particularly Senegal. They are so important that uncertainty is omnipresent in this context, whether it relates to climatic conditions, crop pest problems, the internal functioning of commodity chains (i.e., production, transport, marketing) or product prices. This raises the question of what influence the use of information can have on the economic decisions of producers? These decisions have the sole aim of maximizing their utility (i.e., consumers) or their profit (i.e., firms).

Overall, this chapter aims to show the benefits of using information systems in decision-making and on agricultural strategies of the farms in the Senegalese groundnut basin.

This chapter is structured as follows: first, we will analyze the influence of market information use on cowpea farmers’ economic decisions. Next, we focus on access to and use of climate information by farms. Finally, following the conclusion, we provide recommendations.

Methodology

1. Sample

Three communes were chosen: Ndinguiraye (Bambey), Ndindy (Diourbel), and Niakhar (Fatick). In total, 14 villages belonging to these three communes benefit from the Yeugglé information system. We adopted a sampling rate of 50% to randomly select 7 villages through stratification by village. In each village, 15 producers were randomly selected. Thus, a group of 105 cowpea producers using the Yeugglé MIS were surveyed.

1.1 Market Information

We conducted a survey targeting cowpea producers in the Senegalese groundnut basin with a sample made up of cowpea producers who use the Yeugglé information system. This system is managed by the cowpea commodity chain sector setup within the framework of the Support Program for Agricultural Sectors (PAFA). Like other MISs, cowpea prices are collected weekly at the markets—mainly the markets of Diourbel, Bambey Serère, Ndiguiraye, and Gaouane—and are distributed by SMS to the producers of this commodity chain sector, which has become a national framework for sector consultation.

1.2 Climate Information

With regard to climate information, the complexity and heterogeneity of the farms as well as the size of the study area led us to adopt a “multi-stage” sampling methodology, which consists of consecutive stages developed to arrive at the selection of basic observation units (i.e., farms) where the requirements of representativeness are respected. A reasoned choice was made for the selection of the PAFA zone as well as for the villages, which were dictated by the option of the millet/sorghum and sorrel (bissap) sectors, the focus of the PAFA. For the farms, all the members who participated in the training sessions were retained, as well as those with extensive experience in climate information at the Kaffrine level. The trainings were organized for the representatives of the PAFA network to share with them the concept of climate-smart agriculture with an emphasis on climate products. These were three-day workshops that trained farmers, defined the needed products, and identified a framework for transmission of climate information. These were held in Diourbel for the northern Groundnut Basin area and in Kaolack for the southern Groundnut Basin, with each workshop bringing together about 20 producers.

Our sample consisted of 82 farmers in three regions (Diourbel, Fatick and Kaffrine) as presented in Table 1. For the controls (i.e., no training in climate information), they were chosen at random from similar villages.

Source: Author based on ISRA/BAME survey data, 2016. Farmers answered a questionnaire with three modules: farm characteristics; access, use and appreciation of climate information; and usefulness of climate information.

1.3 Approach Analysis

The approach is based on a statistical analysis of variables related to the influence of market and climate information in production, marketing, and agricultural input investment decisions. Additionally, as far as climate information is concerned, the comparative analysis of these two sites will make it possible to: (i) define the added value of the adoption of climate information by farmers; (ii) observe how it can be integrated with other CSA technologies or practices; and (iii) identify the factors that facilitate or limit the diffusion of these technologies and practices.

Teachings on the Influence of MIS Use on Cowpea Farmers’ Economic Decisions

1. Market Information Does Not Always Influence the Point of Sale

For half of the cowpea producers (51%), the market information received does not influence the choice of the market where to make the sale. The reason given is the lack of means of transportation and the related costs to be borne. On the other hand, for 49% of the producers, this information influences the place of sale because it allows them to sell at more remunerative prices. Thus, as Egg et al (1996) points out, MIS are supposed to enable producers to make special trade-offs.

2. Market Information Guides the Timing of Sales

For the vast majority of cowpea producers (85%), the market information received influences the time of sale. Actually, the sale is made when the price of cowpea on the market is remunerative, showing that MIS allows farmers to make trade-offs by considering their opportunities. However, for 15% of producers, the time of sale is not influenced by the information received, but depends on social needs and to a lesser extent on the lack of storage infrastructure, hence the need to continue to focus on storage infrastructure for better management of opportunities.

3. Cowpea Price Trends in Reference Markets Drive Pricing

For the majority of cowpea producers (62%), market information influences their choice of selling price. The decision to sell is not made without first knowing the price trends of cowpeas in reference markets, which has a positive impact on their bargaining power vis-à-vis traders who are considered to be better informed. For slightly more than a third (38.1%), market information does not influence the selling price because producers generally engage in tied or loyalty transactions to avoid the risk of not finding any buyer for their produce. The uncertainty that results from the way a farmer finances their campaign can also influence the price. It can include the rising cost of capital, interest rate, limited availability, and degree of creditworthiness (Wade, 2009).

4. Privileging Group Sales Means that Market Information Does Not Influence the Quantity to be Sold

Market information does not influence the choice of the quantity to sell for most cowpea producers (75%). The reason given is that generally the sale of the crop is not done in a sequential manner but rather grouped together, which avoids post-harvest losses. On the other hand, for nearly 25% of these producers, market information influences the choice of the quantity to sell. The quantity sold is greater when the price is high. Conversely, it is low when the price is not remunerative. In other words, the higher the price, the greater the incentive for producers to sell a large quantity.

5. Market Information Influences the Choice of Crop

Market information influences the majority of producers (56%) in their choice of crop. It allows them to cultivate the crops for which prices are the most remunerative, beyond millet, which is a food crop in this zone. In fact, more and more food crops are being sold on the markets, which is why it is important to be able to identify the most profitable crops for the zone in order to have a substantial cash income to meet the family’s financial needs. Indeed, when the price of a good increases, suppliers are encouraged to increase their supply in order to increase their profit.

6. Market Information Influences the Choice of Plot Size

For the vast majority of cowpea producers (82%), market information influences the choice of plot size. Depending on the prices of the crops observed on the markets during the past raining season and during the dry season, producers decide to increase or maintain a given plot size for a given crop for the next season. This decision is influenced by market risk and environmental uncertainty. In fact, being in a situation of uncertainty, farmers favor flexibility by minimizing the investments (i.e., monetary or in time) that they devote to production. In the event that the crops are effectively destroyed, the loss of investment will be less important with this posture than if the feared event were not to occur (i.e., as if it were a certain universe). In a certain (favorable) universe, producers can safely make the investments required to maximize their production, which they know from the outset will be good at harvest time (Fraval, 2000).

7. Market Information Influences the Decision to Invest in Agricultural Inputs

For most cowpea farmers (94%), market information influences the decision to invest in agricultural inputs. Thus, producers prefer to invest in agricultural inputs for which prices are much more remunerative. In other words, prices guide producers towards the use of production factors. Nevertheless, they face production uncertainty because agriculture is affected by many uncontrollable events that are often related to climatic conditions (i.e., excessive or insufficient rainfall, extreme temperatures, hail), as well as diseases and pests. These factors have a direct impact on the quantity and quality of production (Wade, 2009). Such influences create an increase in the quantity of inputs used (58%) and with particular attention paid to the quality of inputs used (34%)

Access and Use of Climate Information

1. ANACIM: The Main Provider of Climate Information

The information on the climatic and meteorological forecasts are broadcasted every day by the National Agency of Civil Aviation and Meteorology (ANACIM) via radio and television. Their information includes temperature, rainfall, and humidity. Sometimes, if there are abnormal situations in sight (i.e., strong wind, heavy rains, etc.), the weather service alerts producers, and even fishermen, so that they can make arrangements. However, as part of its collaboration with projects in certain areas, particularly in Kaffrine, in addition to training, ANACIM broadcasts weekly climate information during production periods, particularly the rainy season, via radio and SMS. The forecast period is generally 1, 3, and 10 days.

In the groundnut basin, 67% of producers are accustomed to receiving climate information (Table 2). ANACIM is the main provider of this information (52%), a trend that can be explained by the presence of the CCAFS project in the area since 2010, which instilled in farmers the importance of using climate information. Various annual training sessions and the ANACIM’s sharing of seasonal forecasts have finally convinced farmers, who have confidence (94%) in the information provided by ANACIM. This confidence is owed to the accuracy of past forecasts. However, 5% still do not trust ANACIM and 1% do not follow its information.

Besides ANACIM, the radio, with 6%, ranks second because of its widespread use in rural areas. The Yeugglé platform (4%), however, is becoming increasingly important, particularly in Diourbel, where ¾ of the “highly experienced CI” group get their information the platform, especially after it integrated climate information into its services. These services are followed by the decentralized services of the Ministry of Agriculture, the sector tables (PAFA), television, and traditional news, each with 1%. Thus, the sharing of climate information is more important when there is a regrouping of actors during training workshops or other meetings.