Market price risk management advisory through extension services: Tools and farmer adoption patterns

Introduction

Falling coffee prices in 2019 wiped out nearly a third of net income for smallholder producers in Costa Rica's highland regions, exposing a gap that production-focused extension alone cannot fill [1] . Price risk-the chance that market prices drop below production costs-is consistently ranked among the top three concerns by Central American farm households [2] . A range of tools exists to manage this risk, from simple SMS alerts to formal futures contracts, yet adoption among smallholders remains low [3] . Extension services are well positioned to introduce these tools because they already maintain trust-based relationships with farming communities [4] . But most extension curricula in the region still center on agronomy and pest management, leaving price risk advisory as an afterthought [5] . Where pilot programs have tested market-oriented extension, results have been mixed-adoption tends to cluster around simpler, informal mechanisms while formal financial instruments see little uptake [6,7] . This research assessed which price risk management tools farmers adopted when introduced through extension services and how adoption patterns varied by extension contact frequency and region. The objectives were: a) To measure adoption rates for five price risk tools across four Costa Rican agricultural regions, b) To test the association between extension contact and tool adoption, and c) To identify regional and farmer-level factors shaping adoption choices [8] .

Field research design

A multi-site cross-sectional design was used, sampling from four distinct agricultural regions: Central Valley, Caribbean Coast, Northern Plains, and Southern Highlands. These regions were chosen to capture variation in crop type, market connectivity, and extension infrastructure. Within each region, three cantons with active extension programs were selected. Households were sampled proportionally from canton-level farmer association registries, yielding 218 respondents distributed across the four regions [9] .

Seasonal variations

Data collection ran from October 2021 to April 2022, spanning both the main harvest season for coffee and staple grains (October-January) and the dry-season marketing window (February-April). Price risk awareness peaks during harvest when farmers negotiate sales, making this period relevant for assessing tool awareness and recent adoption behavior. Extension contacts were also more frequent during harvest months [10] .

Material and methods

Material

A structured questionnaire was administered face-to-face to www.extensionjournal.com 218 smallholder farmers. The instrument captured household demographics, crop portfolio, extension contact history, awareness and use of five price risk tools, and perceived barriers to adoption. Secondary data on regional price indices were obtained from the Costa Rican National Production Council. Ethical clearance was granted by the University of Costa Rica Research Ethics Committee (Protocol UCR-VI/2021-058, dated September 20, 2021) [11] .

Methods

Descriptive statistics summarized adoption rates by tool and region. Chi-square tests compared adoption across extension contact categories. Pearson correlation measured the relationship between annual extension contacts and tool adoption. Binary logistic regression modeled the probability of adopting any tool as a function of extension contacts, farm size, education, market distance, and region. Data were analyzed using Stata version 17 [12] .

Results

Table Group marketing dominated in less commercially connected regions (Caribbean Coast, Southern Highlands), while SMS alerts and formal tools were higher in the Central Valley. The heatmap highlights that informal tools (group marketing) showed the highest adoption uniformly, while formal tools (futures, insurance) remained low across all regions. www.extensionjournal.com A steep gradient was evident: farmers with 5+ annual contacts adopted at 71.3%, nearly six times the rate of those with no extension contact (12.8%). The pathway classifies tools into formal, semi-formal, and informal categories, showing how extension advisory channels farmer risk perception toward appropriate tool selection.

Comprehensive interpretation

Extension contact frequency was consistently the strongest factor driving tool adoption. Regional context shaped which tools farmers preferred, with informal mechanisms dominating where market infrastructure was weaker.

Discussion

The dominance of group marketing among adopted tools echoes findings from similar Central American contexts [6,7] . Group marketing requires no financial literacy or institutional access-farmers pool produce and negotiate collectively, which reduces individual transaction costs. In contrast, futures contracts and price insurance demand understanding of abstract financial instruments, access to formal markets, and upfront costs that most smallholders can't absorb [13] . The strong dose-response relationship between extension contacts and adoption suggests that price risk advisory works best as a repeated, relationship-based process rather than a one-off information event [14] . The regional patterns indicate that extension agents should tailor their tool recommendations to local market conditions. In commercially connected areas like the Central Valley, promoting SMS alerts and warehouse receipts alongside group marketing seems feasible. In more remote regions, strengthening group marketing while gradually introducing simpler formal tools may be more realistic [15,16] . www.extensionjournal.com

Conclusion

This research shows that extension services can meaningfully increase farmer adoption of price risk management tools, but the type of tool adopted depends heavily on regional market context and farmer capacity. Group marketing was the most widely adopted tool across all regions, while formal instruments remained marginal. Extension contact frequency was the strongest predictor of adoption, reinforcing the value of regular, sustained advisory engagement. Extension programs should adopt a tiered approach-building on the informal tools farmers already trust while gradually introducing more formal instruments where market infrastructure allows. Matching tool complexity to farmer readiness is likely to produce better outcomes than promoting a uniform toolkit across diverse agricultural regions [17] .

Acknowledgement

Acknowledgements Funding sourcesThis research was supported by an internal faculty research fund from the University of Costa Rica. No commercial funding was received. Institutional supportThe authors thank the Faculty of Agriculture at the University of Costa Rica and the National Production Council for facilitating data access.

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