Stochastic dominance levels and their effects on cash crops diversification

Farmers' crop production preferences are often overlooked when recommendations are made on crops to plant in different regions due to paucity of knowledge on the underlying farmer preferences. This limitation can negatively impact their productivity and poverty levels. The study aimed at revealing the stochastic dominance of crops which are grown by smallholder farmers, and was conducted in Rwanda's Rulindo District from a sample of 400 farm households using various statistical methods, including stochastic dominance tests and kernel density to determine crop preferences, and a subsample of 50 smallholder farmers for a quasi-experiment to obtain certainty equivalence data which was used in both nonparametric first-order and normalized second-order stochastic dominance tests. A Kruskal-Wallis rank test was conducted to contrast results of stochastic dominance analysis. The study revealed that traditional cash crops like tea and coffee demonstrated a first-order stochastic dominance over macadamia. In contrast, traditional cash crop options did not dominate nonmandatory cash crops such as chili, flowers, and sericulture. Notably, no cash crop showed second-order stochastic dominance over others among the five tested cash crops, and farmers generally did not display risk-averse attitudes. Simularly, the Kruskal-Wallis test results showed no significant difference in the ranks of certainty equivalence among cash crops, nevertheless, with coffee and tea having rank sums of 4362.50 and 3978.50 in the first and third positions, respectively. The focus group discussion results revealed that farmer preferred food crops over cash crops, particularly beans with its aura of awe among Rwandan consumers taking the lead. Based on these findings, the research recommends promoting macadamia in suitable agro-ecological zones for poverty alleviation while supporting ecologically appropriate coffee and tea production, especially given their demonstrated market resilience during the COVID-19 pandemic. This research underscores the importance of considering farmer preferences and local conditions when making crop recommendations for agricultural development. Key words: Cash crop, Kruskal-Wallis , Risk aversion, Stochastic dominance, Rwanda