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INVESTIGATOR: Khanal, A. R.

PERFORMING INSTITUTION:
TENNESSEE STATE UNIVERSITY
3500 JOHN A. MERRITT BLVD
NASHVILLE, TENNESSEE 37209

ENHANCING ECONOMIC BENEFITS AND SUSTAINABILITY OF SMALL FARM BUSINESSES IN TENNESSEE THROUGH ENTERPRISE DIVERSIFICATION AND AGRITOURISM

NON-TECHNICAL SUMMARY: Small farming businesses face great challenges for continuation and survival using conventional commodity production methods. Small farms are often unable to adopt improved technology, new managerial practices, and intensive cultivation to keep pace with competitive large farms. Enterprise diversification is an important risk management tool and an effective strategy for mitigating income risk. With growing emphasis on diversification and structural adjustment, there is an increasing interest in developing agritourism. The goal of this three year project is to analyze and evaluate viable strategies for sustainability of small farms in Tennessee. Both primary and secondary data will be used. The specific objectives are: (1) investigate the structural factors affecting agritourism location in Tennessee; (2) analyze factors influencing farm households' decision to participate in agritourism and enterprise diversification and quantify the impact of the decision on farm household's economic and financial performance; (3) examine the adoption of best management practices (BMPs) in agritourism and the role of demographic and socio-economic factors in adoption of BMPs; (4) estimate the economic impacts of agritourism and related agricultural and recreational services industry on Tennessee economy; and (5) create and publish online- and printed- outreach materials to disseminate findings. The project will also provide experiential learning opportunity for students. Project will advance knowledge about enterprise diversification and agritourism, and their impacts on farm- and State- level economies. The project builds capacity at Tennessee State University, particularly advancing new area of research in economics of alternative agricultural enterprises, profitability, impact, and efficiency evaluation, and quantitative decision analysis.

OBJECTIVES: The overall research goal of the project is to assess factors influencing adoption of enterprise diversification and agritourism and their role and impact on economic and financial performance on small farms in Tennessee and to assess the impact of these sectors to the State economy. The specific objectives are: (1) To investigate the structural factors affecting agritourism location in Tennessee; (2) To analyze factors influencing farm households' decisions to participate in agritourism and enterprise diversification activities and quantify the impact of the decision on farm household's economic and financial performance; (3) To examine the adoption of best management practices (BMPs) in agritourism and the role of demographic and socio-economic factors in adoption of BMPs; (4) To estimate the direct, indirect, induced, and total regional economic impact of agritourism, and related agricultural and recreational service industry on the Tennessee economy; and (5) To create and publish online- and printed- outreach materials to educate and disseminate findings.

APPROACH: We will use different research and scientific methods according to different objectives. Objective 1: Structural factors influencing location of agritourism businesses This objective will involve extensive literature review about the structural factors and investigate the role of structural factors in agritourism location using secondary data at the county level. Structural factors have not gained enough attention in the literature, but could play an important role determining where agritourism businesses are likely to be clustered in Tennessee. First, we will map the spatial location of agritourism farms in Tennessee using the list maintained by Tennessee Agritourism Association and Pick Tennessee Products. Second, county characteristics and data will be collected from US Census and County Business Patterns. Third, we will test hypotheses about structural factors affecting agritourism location choice. Based on the previous literature, there are potentially two sets of structural factors of interest and their interactions in location choice: a) factors related to urban status/ distance from urban center/ urbaneness of the county and b) factors related to capital (such as income level of residence and education capital). However, there have been mixed findings about the roles of these factors. Therefore, we will investigate the following research questions and test the hypotheses:Question 1: Is proximity of farms to urban centers (urban or metro area) a significant factor in agritourism location choice and establishment?;Question 2: Could per capita income of residence (proxy of economic capital) and other public capitals affect agritourism location and establishment?;Question 3: Is combined and interaction effect of urban status of the county and capital attributes of the county important factors in agritourism location choice?For these research questions, we will test the following hypotheses:Null hypothesis 1: there is no effect of urban status of the county on agritourism location; Null hypothesis 2: there is no effect of income and capital on agritourism location; Null hypothesis 3: there is no interaction effect of urban status and capital on agritourism location. Rejection of these null hypotheses and statistical significance would show the effect of urban status, capital, and their interaction, respectively on agritourism location choice and establishment.Objective 2: Factors influencing decision to participate in agritourism and enterprise diversification activities and quantify the impact of the decision on farm household's economic and financial performanceThis objective has two components: first, decision analysis about agritourism businesses (adoption) and second, the impact of such decision on farm household's economic and financial performance. This objective will be investigated using the micro- (farm/ household level) data from primary survey and advanced econometric methods. Specifically, the effect of the factors representing demographic, socio-economic, location, types of farms, household income and financial factors will be tested for their role in farm household's decision to participate in agritourism.Relationship of each explanatory variables with decision to participate in agritourism will be estimated using probit or logistic regression and marginal effect of each explanatory variable will be computed. The economic and financial performance of the farm household due to the participation will be estimated using treatment effect models. Theoretically, the impact of diversification decision and agritourism is captured by parameters. However, the accuracy, consistency, and unbiasedness of the impact estimate depends on how carefully we choose econometric/statistical method and define counterfactual (comparison group, bench mark). Quantitative impact evaluations can be broadly classified as ex-ante and ex-post evaluations. Ex-ante evaluation is the prediction for future outcome based on current situation: based on simulation of the assumption about how the economy works (Khandker et al. 2010). Ex-post impact evaluation, on the other hand, measure the exact outcome obtained by participants that are attributable to the program or particular strategy. Ex-post impact evaluations are also referred to as treatment effect models. We will use treatment effect models and compute average treatment effects (ATE) accounting for good counterfactual (Becker and Ichino 2002; Abadie and Imbens 2002) following appropriate methods recently introduced and applied in agricultural economics (Uematsu and Mishra, 2012; Joo, Khanal, and Mishra 2013; Khanal and Mishra 2016).Estimation of the models explained above will be based on primary data from Tennessee farmers. A list of farms in Tennessee with detailed contacts has been compiled as a part of Evans-Allen (formula fund) project. We will utilize this information and develop further by collecting data through primary survey following appropriate survey instrument, and procedure (Dillman, 1978). A student will be involved in sending out the surveys and collecting responses.Objective 3: Agritourism best management practices (BMPs) and factors influencing BMPs adoptionBest management practices are suggested practices that an agritourism professional can use to minimize risks in an agritourism enterprise. Best management practices in agritourism can be summarized under the following general areas: authentic farm and ranch experience, educational experience, customer service, adequate public facilities, community relations and planning for financial futures (AGMRC, 2017). However, specific set of activities differ across states. Under this objective, we will assess BMPs adopted in agritourism farms in Tennessee. To do so, we will conduct in-depth study through focus group discussions and survey specific to agritourism farms. Number of BMPs adopted by agritourism farms, factors influencing adoption (or non-adoption) of BMPs, decision factors and causal inferences will then be analyzed using appropriate qualitative and quantitative methods.Objective 4: Total regional economic impact of agritourism and related agricultural and recreational service industry in TennesseeThis objective involves an estimation of regional economic impact using secondary data from Economic Impact Analysis for Planning (IMPLAN) Inc. IMPLAN data has been widely used for estimating regional economic impacts. However, the role from different components of agricultural industry such as agritourism and related agricultural recreational industries on state level economy in Tennessee has not been explored. We will obtain industry-specific information based on SIC and NAICS codes and use IMPLAN software. The project PI will attend training and workshop to acquire precise knowledge about recent advances in IMPLAN and data. Then a student will be trained by the PI to use the software and compute direct, indirect, and induced impact of agritourism and related agricultural recreational industries on Tennessee economy.Objective 5: Create and publish online- and printed- outreach materials to educate and disseminateThe fifth objective of the project is to effectively disseminate the project findings, results, and outputs to a range of pertinent audiences. We will publish online- and printed- outreach materials and disseminate the results using existing extension network of the University. More detail about the plan is explained under dissemination plan.

PROGRESS: 2020/03 TO 2021/03
Target Audience:Target audiences in this period havebeen the small farmers in Tennessee, small farm households, farming operations with agritourism enterprises in Tennessee. Changes/Problems:This is the third reporting period of this 3-year project. Since the incidence of pandemic in 2020 and some other factors such as, difficulty in finding graduate research assistant appropriate for the project, some project activities were delayed. However, the project has addressed and tackledthese challanges and has been approved for ano cost extention for an additional reporting period. What opportunities for training and professional development has the project provided?The project has collected primary datainvolving research questions that were never explored before in Tennessee. Using this primary data, a minoritygraduate student involved in this project is writing a MS thesis and earning a degree.Additionally, the undergraduate students in the PI's research team have gained exposure to the research methods and experiential learning through simple analyses using the data and questions. The graduate and undergraduate students and research assistants are sharing these findings through conference presentations and seminars. Therefore, the project has contributed to the training and professional development of the graduate and undergraduate students involved. How have the results been disseminated to communities of interest?The results havebeen disseminated through conference papers, University-wide research symposium, and journal publications. Additionally, project description has been discussed in stakeholder meetings like the TSU Small Farm Expo, and posted in the project information page linked with faculty website. What do you plan to do during the next reporting period to accomplish the goals?In the next reporting period, we continue ouranalysis of primary survey data.We will do data compilation and statistical analysis to test the series of hypotheses, consistent with research questions and objectives.Contributing to each objective, we plan to prepare manuscripts,conference papers, thesis document, and conduct presentation and outreach activities.

IMPACT: 2020/03 TO 2021/03
What was accomplished under these goals? We addressed objectives 2, 3, and 4 by designing questionnaire and collecting primary data relevant to each objective. In this reporting period, we finalized survey design and maintenance in the electronic form. We maintained acontact list of small farm operations and agritourism enterprises in Tennessee.We finalized sampling procedure to administer a survey to small farm operations and agritourism enterprises representing east, middle, and west Tennessee. Through an electronic link of the questionnaire, we administered asurvey through an email. An electronically maintained survey link was sent to 1139 sampled farmers. We received around 150 responses. Summary statistics and description of main findings from the survey havebeen analyzed and compiled. Based on the response obtained to this survey, we maintained 139 responses appropriate for statistical analysis. We have prepared conference papers, outreach oral and poster presentations, and manuscripts based on the analysis. In-line with objective 2, we examined adoption of agritourism among farmers in Tennessee, specifically testing and analyzing the mean comparison of adopters and non-adopters across different attributes. Our preliminary results show significant differences in demographic, economic, and farm characteristics between agritourism adopters and non-adopters. In-line with objectives 3 and 4, we have summarized best management practices (BMPs) adopted by Tennessee agritourism operations. Our preliminary findings suggest that environmentally safe crop-related BMPs, adequate information and communication related BMPs, animal interaction and safety related BMPs are the most adopted practices in agritourism operations in Tennessee. Further, we have assessed the attributes of BMP adopters and regional differences in BMPs adoption in Tennessee. Based on these analyses, we have developed conference papers, outreach oral and poster presentations. Peer review manuscript is in preparation. The publication, presentation, and outreach activities contribute to our objective 5.

PUBLICATIONS (not previously reported): 2020/03 TO 2021/03
1. Type: Journal Articles Status: Published Year Published: 2021 Citation: Adhikari, S., & Khanal, A. R. (2021). Economic Sustainability and Multiple Risk Management Strategies: Examining Interlinked Decisions of Small American Farms. Sustainability, 13(4), 1741.
2. Type: Conference Papers and Presentations Status: Accepted Year Published: 2021 Citation: Holland R., Khanal A. R., and Ojha R. (2021). Examining the adoption of Agritourism as alternative farm enterprise in Tennessee: who are the adopters? Selected oral presentation, 43rd Annual Tennessee State University-wide Research Symposium, March 2021
3. Type: Conference Papers and Presentations Status: Accepted Year Published: 2021 Citation: Ojha R., Khanal A. R., Adhikari S., Crawford M. (2021). Examining the Adoption of Best Management Practices by Agritourism Operations in Tennessee: What, Who, and Where? Selected oral presentation, 43rd Annual Tennessee State University-wide Research Symposium, March 2021