| TD Waduge, JC Edirisnghe *, APS Fernando, HMLK Herath and UK Jayasinghe-Mudalige
Dept. of Agribusiness Management, Faculty of Agriculture and Plantation Management, Wayamba University of Sri Lanka, Makandura, Gonawila
Abstrsact
It was observed that even in the times of higher prices some smallholder rubber producers remain poor. The reason for this variation in income is thought to be risks associated with rubber production. Therefore, this study investigated the risks related to labour and weather taking a sample of 500 smallholder farmers from the Kalutara district. A Just and Pope stochastic production function is estimated using a three step Feasible Generalized Least Square (FGLS) technique. The estimated variance equation reveals that rainfall and labour usage are risk increasing while price is risk reducing. Weather (rainfall) is typically believed to be the primary source of loss in potential income. Although, results show that this is true based on the sign of expected coefficients, they failed to show statistical significance. However, variability of labour and rubber price showed statistical significance. It is therefore envisaged that availability of farm labour is a key issue in production risk, which is not given due consideration in policy.
Key words:Weather, Just and Pope Production Function, Risk, Feasible Generalized Least Squares
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