Welfare of the rubber crop diversity farmers under risks of price in Thailand

The presence of risks in rubber markets would have significant adverse effects on farmers’ welfare. Crop diversity is usually proposed as a countermeasure to mitigate the negative environmental impacts and high price risks faced by monocultural rubber farmers. Given that most farmers in developing countries are risk-averse, the present study aims to examine the differences in price risk experienced by crop diversity and monoculture rubber farmers, while illustrating the welfare impacts of crop diversity within a theoretic risk-averse framework. Standard deviation is employed as a measure of price risk indices for rubber and other major agricultural products. The data on prices of main agricultural products were obtained from the Office of Agricultural Economics (OAE), covering the period from 2002 to 2021. The estimated price risk indices for rubber prices and prices of 18 other major crops indicate that the annual rubber price risk index is highest among all major agricultural products in Thailand, with a value of .417. In comparison, the average price risk indices of food crops and horticulture/fruit crops are .252 and .257, respectively. These elevated levels of rubber price risks could result in substantial risk costs and decreased welfare for farmers engaged in monoculture practices, particularly those who are trapped in poverty. This confirms the potential benefit associated with adopting crop diversity to enhance household welfare within the rubber industry, providing compelling evidence supporting efforts towards promoting rubber crop diversity plantation and sustainable development of rubber industry in Thailand.