1. Introduction
Fertilizers play a very important role in increasing the crop output and ensuring food security in many countries. However, the overuse of chemical fertilizer has led to severe environmental issues such as land degradation, non-point source pollution, and greenhouse gas emissions [
1,
2,
3,
4,
5]. In China, the world’s largest consumer of chemical fertilizer, overuse of chemical fertilizers is more serious [
6]. In 2015, China consumed 60 million tons of chemical fertilizer [
7], accounting for over 30% of world chemical fertilizer consumption on only 9% of global cropland [
8]. Reduction of chemical fertilizer use is needed to mitigate these negative effects, which can be done while still meeting China’s food demand [
9]. Consequently, the Chinese government has recently exerted increasing efforts to reduce chemical fertilizer overuse and aim to reach zero growth in chemical fertilizer and pesticides use by 2020, which specifies incentive subsidies and tax exemption to organic fertilizers as well as formula fertilization with soil testing [
10,
11]. It is widely recognized that organic fertilizer can significantly improve soil quality and nutrition, farm productivity, and avoid adverse environmental and health impacts from agricultural chemical use and thus help achieve sustainable agricultural development [
2,
12,
13,
14,
15,
16,
17]. However, the adoption rate of organic fertilizer is still low compared to the increasing usage of chemical fertilizer because many farmers fear the loss of crop output and the odor of organic fertilizer [
18,
19]. Understanding the determinants of organic fertilizer adoption, especially the factors driving farmers’ decisions about the adoption of organic fertilizers, is relevant for informing policy-making towards the negative environmental impacts and may help China achieve its sustainable agriculture development goals, such as the zero growth of chemical fertilizers and pesticides, and recycling utilization of animal and plant waste [
20].
Existing studies suggest that fertilizer investment depends on numerous factors, including individual characteristics of the farm or farmer [
2,
15], off-farm employment [
21], knowledge training [
18,
22], as well as socioeconomic factors such as fertilizer supply chain [
23] and the policy environment [
24]. Certain factors are found to have inconsistent impacts. For instance, some studies argue that organic fertilizer is a long-term investment option for farmers, and land tenure security is an important factor affecting its use [
25,
26,
27], while others only find the impact of land tenure on investment in soil conservation measures to be weak [
28,
29]. Empirical evidence from Asian developing countries also suggests that off-farm work and agricultural cooperatives may be important in promoting investments in organic soil amendments [
13,
21]. Clearly, farmers’ fertilizer investment decisions are jointly affected by a variety of factors, yet most studies focus on observable characteristics, leaving possible psychological determinants much less understood.
Among the possible psychological factors, perceptions and risk attitude are perhaps the most important ones. Existing studies suggest that farmer’s perceptions towards organic fertilizer tend to influence their investment on soil-improving practices [
22,
30,
31]. In Denmark, Case et al. [
30] show that soil structure improvement is the most important reason to use organic fertilizer, while unpleasant odor, uncertainty in nutrient content, and difficulty in planning and use are the major barriers. Using data from multiple European countries, Hou et al. [
32] found that perceived high cost and long payback period are the main barriers of investment in organic fertilizer. In addition, farmers in developing countries are generally found to be risk averse against production and climate volatilities [
33,
34,
35], which can influence their investment in inputs and agricultural technologies [
36,
37,
38,
39,
40,
41,
42]. For instance, production uncertainty may lead to the overuse of fertilizers [
43,
44]. As soil improvement may potentially safeguard crop growth against production risks [
12], it may incentivize risk-averse farmers to switch towards organic fertilizer.
Despite these appealing logics, few studies have specifically analyzed whether and how the above-mentioned factors affect Chinese farmers’ organic fertilizer investment. The possible linkages between perceptions, risk preference, and organic fertilizer adoption/investment need to be better understood, because China consumes one third of world’s chemical fertilizer [
8], and farmers’ fertilizer use patterns would have significant implications for global environmental change. Potential policy practices, such as official guidelines that aim to promote organic fertilizer in China, may also inform decision makings in other countries through demonstration effects. The need for such knowledge motivates the current study.
We use a comprehensive rural household survey in Guangxi Autonomous Region (province equivalent), a major agricultural region in southern China, to empirically test the possible linkages between farmer’s perceptions, risk preference, and fertilizer investment. Rice and banana farmers are included in the study. As the most important crops in Guangxi province, rice and banana crops occupy about two million hectares of farmland and serve as the sources of the main household income to more than 20 million people [
45]. Rice and banana crops are also selected because staple and horticultural farmers may exhibit varying fertilizer investment behaviors, and parallel analysis of these two crops can provide a better picture of organic fertilizer investment. Moreover, plenty of commercial organic fertilizers (e.g., organic fertilizers made from animal manure and cane sugar refinery waste) are supplied in the rural input market of Guangxi. Therefore, Guangxi provides an ideal context for our study.
The rest of the article is organized as follows.
Section 2 describes the survey data and analytical methods.
Section 3 presents the empirical results and their robustness.
Section 4 provides discussion with policy implications,
Section 5 concludes our findings.
4. Discussion
The above results consistently suggest that the perceptions and risk attitude played important roles in organic fertilizer investment. Among multiple perceived traits considered in the analysis, farmers’ investment decisions were largely affected by the profit function arguments, namely the yield-increasing and quality-improving effects associated with organic fertilizer use, as well as a perceived cost increase. Crop-specific analysis further suggests that the soil improving effect of organic fertilizer was also important in banana production. However, environmental friendliness appeared to be unattractive to farmers, who may usually be myopic in developing countries and may need community-level coordination in providing environmental goods that benefit themselves in the long run [
5,
18].
The confirmed roles of perceptions and risk attitude in organic fertilizer investment have directed policy implications regarding environmental and agricultural sustainability in China. First, farmers’ awareness and knowledge of the benefits of organic fertilizer can be potential targets of extension efforts that aim to promote organic fertilizer adoption and investment. For many years in the past, the highest level of chemical fertilizer use per hectare in China only got an intermediate amount of average crop yields relative to the rest of the world [
2]. Actually the application of organic or organic–chemical fertilizer compounds may reduce the use and improve the efficiency of chemical fertilizers and improve the long-term productivity [
49]. Therefore, knowledge training and demonstration about organic fertilizer use through the direct engagement of farmers in the field could be an effective approach to increasing awareness regarding the advantages of organic fertilizer use [
11,
18]. Second, the cost factor cannot be overemphasized, which may deserve consideration of support in the short term and should be reduced through supply-chain efficiency improvement in the long term. That may imply interventions such as a subsidy for organic fertilizer processing technology, efficient and low-cost organic fertilizer research and development, and promotion and training to stimulate farm households to apply organic fertilizer [
15]. Third, the risk-mitigating effect of organic fertilizer, if increasingly understood, may further incentivize the switch towards its use. In developing policies to stimulate the switch from chemical fertilizer to organic fertilizer, it is important to consider the relationship between various types of agricultural risks, the risk preferences of farmers, and farmers’ input decisions [
39]. Fourth, the so found impact was heterogeneous between rice and banana farmers, and intervention designs may need to be crop-specific. Given these notions, possible considerations include enhancement in field demonstrations of organic fertilizer application, as well as cost reduction through a variety of mechanisms, such as market regulation and provision of financial incentives to supply-side technological innovation, should consider specific crop features.
Additional insights were also provided by covariate impact estimates. To be specific, promoting the development of farmers’ cooperatives and strengthening land tenure security can have positive impacts on investment in organic fertilizer. Improving tenancy contracts through longer tenure durations [
21] and strengthening the cooperatives to provide more input service of organic fertilizers can be considered [
13,
19].
While our findings do not speak directly to the merits of these policies, they are worth careful consideration from central to local governments that aim to reduce chemical fertilizer use to realize sustainable agricultural development. The comparative analysis of rice and banana crops as examples of staple and horticultural crops, respectively, further confirms the need to consider crop features in promoting organic fertilizer investment. Although the results may not be universally consistent in the developing world, they could be potentially informative to areas with similar agro-ecological environments or areas at similar developmental stages where farmers’ organic fertilizer perceptions and risk attitude are comparable.
5. Conclusions
Using a recent survey of rice and banana farmers from Guangxi province, China, we assessed the impacts of perceptions and risk preference on farmers’ organic fertilizer investment. Through the estimation of a Tobit model, it was found that several perceived traits of organic fertilizer, including yield-increasing, quality-improving, and cost-increasing effects, as well as risk aversion, elicited from a lottery choice experiment, significantly affected farmers’ investment behavior. These results were further compared and contrasted with estimates from an OLS regression that modeled chemical fertilizer investment, where most of these factors had opposite impacts on the use of the latter. Our main findings regarding organic fertilizer use were further validated in a robustness exercise where a double-hurdle model that differentiated adoption decision and investment level was estimated.
Our study adds to the literature by identifying the roles of farmers’ perceptions and risk attitude in a typical agricultural region in China. Also, we confirmed the impact heterogeneity between rice and banana crops and suggested the need to design policy tools on a crop-specific basis to improve their cost-effectiveness. The remaining limitations, such as the cross-sectional nature of data and the specific geographical focus, jointly call for further research to help establish the external validity of the findings. Potential policies as discussed above may need further evaluation in context before implementation to maximize their cost-effectiveness.