Abstract
This paper describes an investigation of the technological relation between fertilizer utilization and weather risk for wheat production in the Adana Province of Turkey. Reports of studies on this intensively investigated topic have concluded that risk-averse farmers use less fertilizer (i.e. fertilizer is a risk-increasing input). However, recent studies assessing the environmental problems of agriculture present the view that production risks may cause over-utilization of fertilizer (i.e. fertilizer is a risk-decreasing input). Provided that fertilizer is a risk-increasing input, the existing literature on the studied area found risk-averting behavior in wheat producing farmers. Because farmers in the area studied recognize over-utilization of fertilizers from the aspect of sustainability, so the assumptions in the existing literature should be tested by directly estimating production technology. Two shortcomings are apparent in studies estimating production technology. First, the production technology assumed by these studies limits the farm management under production uncertainty. Second, the estimation method does not suit individual data collected in regions that have similar production environments. Different from earlier studies, this paper presents a state-contingent technology approach that affords decision-makers more flexible management choices under production uncertainties than the conventional approach does. This paper introduces a sufficient condition for risk-averse farmers to use more or less fertilizers than the risk-neutral farmer. Subsequently, the production technology is estimated and the sufficient condition is tested. Results show that the risk-averse farmers will use less fertilizer than the risk-neutral farmer.
JEL Classification: D81, Q12, Q52
