Role of expectations in land allocation towards fruit crops: the case of apple

Abstract

Introduction. Higher allocation of land in favour of fruits is vital to raise the farm income and productivity, but such an opportunity is also complemented with higher risk and uncertainty. Economic expectation assumes a great role, while such decisions have an impact on the welfare of farmers in terms of their income and risk. In this paper, we examined the nature of price expectations, their relationship with other economic factors, and analysed the importance of price and income expectations of the fruit (apple) growers on their land allocation decisions. Materials and methods. In this paper, the elicitation technique was used to obtain both price and income expectations of apple growers. The price expectations were compared with the actual price of apple over the last three years and then linked with farmers' input-use propensities. A regression method was used to identify the role of expectations in the decision of land allocation in favour of apple crops. Results and conclusion. Our results showed that better price expectation improves the input-use (generally labour) propensities. However, for allocation of the inelastic factor of production, i.e., land, in favour of a fruit crop, it is the income expectations that explain farmers’ decisions. Farmers’ capacity to generate higher productivity along with the better market prospects together explain their decision regarding allocating land to high value fruit crops.