Risk management in the rain-fed sector of Sudan : case study, Gedaref area Eastern Sudan

Abstract

The rain-fed mechanized agricultural sub-sector of the Sudan has high potential of building a national food stock and foreign exchange earnings, which could contribute substantially to agricultural development and hence the development of the whole economy as well. However, the agricultural production in this sub-sector is generally characterized by a high degree of instability which arises from the nature of the agricultural production that is dependent on uncontrollable weather conditions and unpredictable input and output prices, resulting in instable farm income. It is argued that the adoption of the recommended improved technologies in the rain-fed mechanized sub-sector of Gedaref in Eastern Sudan can increase farm income while diversifying by introducing sheep and gum arabic enterprises to sorghum monoculture may lead to farm income stability. Under these arguments in favor of diversification and use of the improved technology, this book therefore, evaluated different management strategies in this sub-sector under uncertainty. The financial feasibility of different investment and management strategies was evaluated under both; the current traditional and some improved cultural practices. The stochastic budgeting technique using the NPV of farm income as a measure of performance was used in this study to simulate production and market risk over a twenty-years planning horizon on an average farm in Gedaref area. Empirical results showed that the introduction of forest and livestock activities contribute substantially to farm income stability with very low probability of loss at the end of the planning period while the adoption of the new recommended technology also stabilize farm income and guarantee the profitability of the business at the end of the same planning period.