Risk Management Strategies of Desert Farming at Najed in Sultanate of Oman

Rhodes Grass crop is continuously cultivated in coastal area of Sultanate of Oman. This farm practices created a negative impact on the overall agriculture system and producti¬on. The government stopped the cultivation of Rhodes grass in coastal area and support farmers with a capital cost sharing in order to develop new agriculture area at Najed. Due to irrigation water policy regulations imposed by Water Resource Authorities and uncertainty of underground water availability, farmer and investors have little data to help in making investment decisions. The research aims to study and analyze appraisal of Rhodes grass cultivation at new area under risk and uncertainty and rank risk management strategies in terms of risk efficiency. The study applies a stochastic budgeting approach to evaluate the proposed government intensive strategies under uncertainty desert farming. The stochastic budgeting simulation is done by using @ Risk software that allows the representation of risk variables and draw NPV as probability distributions. Different incentives strategies are tested and study shows that raw material subsidy will reduce expected loss probability from 95% to 47% at Hanfeet location and from 83% to 48% at Dawkah area and also increase the chance of getting acceptable positive NPV. The SERF analysis shows that, raw material subsidy alternative in terms of risk efficiency is the most appropriate strategy for Dawkah Location and MRG is the most appropriate policy for Hanfeet Location. The analysis indicates that capital subsidy is not sufficient to mitigate risk at new locations. Government Authorities have to calculate the cost of each risk management tool and select one that could sustain agricultural activates at new area at Najed.