*4.4.1. Sources of risk*

Table 7 shows the relationship between all farmers' socioeconomic status and the different perceptions of sources of risk components. Models 1-4 are statistically significant at the one per cent level. However, the coefficients of determination (*R2*) of most of the models are low. This result is consistent with the findings of Flaten et al. and Meuwissen et al. who found low explanatory power of regression models between the perceptions of sources of risk and risk strategies with the farmers' characteristics.(19, 24) Both authors argued that the lower *R2* in the regression models implies that the farmers' perceptions of sources of risk and risk strategies differed from farmer to farmer.

Gender is negatively related to the 'personal and farm business environment' and 'natural disaster' risks on farm. This implies that female heads of farm households are likely to perceive these sources of risk as significantly more important than male household heads. Similarly, the age of farmers and farm size are negatively related to the 'natural disaster' risk, which means young farmers and farmers who have smaller farm sizes tended to perceive 'natural disaster' as a higher on-farm source of risk. This finding may be attributable to the severe floods across Thailand in 2008.

The highest educational level is positively related to the 'personal and farm business environment' risk, which indicates that more educated farmers perceived this source of risk as significantly more important in farming. The reason is because the more educated farmers realized that the family farm situation and the changes in farm business environment, such as high labour wages and relatively high prices of agricultural land, may indirectly affect their farm operations.

The number of years in farming is negatively related to the 'economic and political' risk perceptions. However, the annual household income and the size of farm household exhibited a positive relationship with this source of risk. This result suggests that less experienced farmers, farmers who have higher annual household income and farmers with larger household size tended to perceive risk related to 'economic and political' as highly important. This finding may have resulted from the instability of Thailand political situation since September 2006.

Farm business finance is positively related to the 'financial situations' risk factor and is statistically significant at the one per cent level. This suggests that farmers who have loans are more likely to pay more attention to the changes to their farm financial situation, such as interest rates and level of debt. In addition, farm business finance is positively related to the 'natural disaster' risk factor. This implies that farmers who have loans perceived this source of risk as highly important. This may be due to the 'natural disaster' risk damaging their farm crops, which results in insecurity of their farm income and debt repayment capacity.

Risks related to the 'economic and political' and 'personal and farm business environment' were perceived as highly important by farmers who had off-farm work. This suggests that farmers who have off-farm work are very concerned about those risks that can disrupt their off-farm income.

With regard to the farm location variable, the regression result showed a strong relationship with more than half of the risk factors. Farmers in the central region perceive the 'personal and farm business environment', 'natural disaster' and 'financial situation' as more important risk factors than north-east farmers; north-east farmers are more concerned about 'economic and political' risk. This finding suggests that the sources of risk on small-holding farms differ significantly between these two regions.


a Variables and models significant at \* *P*<0.1, \*\**P*<0.05 and \*\*\**P*<0.01;

b Factors AS1-6 are labelled as AS1=economic and political, AS2=personal and farm business environment, AS3=natural disaster, AS4=financial situation, AS5=yields and product prices and AS6=input prices;

c 1, if the farmer's age over 40 years old, 0 otherwise;

d 1, if the farmer is male, 0 if female;

e 1, if the highest education of the farmer is high school and higher, 0 if primary school education or less;

f 1, if the farming experience over 30 years, 0 otherwise;

g 1, if the farmer has off-farm work, 0 if no off-farm work;

h 1, if farmer's farm is located in central region, 0 if a farm located in north-east region;

i 1, if farm has a loan, 0 if farm without a loan; and

j 1, if household income greater than 90,001 baht and 0 represent otherwise.

Source: Field survey, 2009

466 Risk Management – Current Issues and Challenges

strategies differed from farmer to farmer.

indirectly affect their farm operations.

since September 2006.

attributable to the severe floods across Thailand in 2008.

the equations.(29)

*4.4.1. Sources of risk* 

consistency. Before performing multiple regression analysis, all models were assessed for normality, linearity, multicollinearity and homoscedasticity to ensure the appropriateness of

Table 7 shows the relationship between all farmers' socioeconomic status and the different perceptions of sources of risk components. Models 1-4 are statistically significant at the one per cent level. However, the coefficients of determination (*R2*) of most of the models are low. This result is consistent with the findings of Flaten et al. and Meuwissen et al. who found low explanatory power of regression models between the perceptions of sources of risk and risk strategies with the farmers' characteristics.(19, 24) Both authors argued that the lower *R2* in the regression models implies that the farmers' perceptions of sources of risk and risk

Gender is negatively related to the 'personal and farm business environment' and 'natural disaster' risks on farm. This implies that female heads of farm households are likely to perceive these sources of risk as significantly more important than male household heads. Similarly, the age of farmers and farm size are negatively related to the 'natural disaster' risk, which means young farmers and farmers who have smaller farm sizes tended to perceive 'natural disaster' as a higher on-farm source of risk. This finding may be

The highest educational level is positively related to the 'personal and farm business environment' risk, which indicates that more educated farmers perceived this source of risk as significantly more important in farming. The reason is because the more educated farmers realized that the family farm situation and the changes in farm business environment, such as high labour wages and relatively high prices of agricultural land, may

The number of years in farming is negatively related to the 'economic and political' risk perceptions. However, the annual household income and the size of farm household exhibited a positive relationship with this source of risk. This result suggests that less experienced farmers, farmers who have higher annual household income and farmers with larger household size tended to perceive risk related to 'economic and political' as highly important. This finding may have resulted from the instability of Thailand political situation

Farm business finance is positively related to the 'financial situations' risk factor and is statistically significant at the one per cent level. This suggests that farmers who have loans are more likely to pay more attention to the changes to their farm financial situation, such as interest rates and level of debt. In addition, farm business finance is positively related to the 'natural disaster' risk factor. This implies that farmers who have loans perceived this source of risk as highly important. This may be due to the 'natural disaster' risk damaging their farm crops, which results in insecurity of their farm income and debt repayment capacity.

**Table 7.** Multivariate regression of the source of risk components and household and farm characteristics of all sampled Thai farmers (n=800) a
