Genetic Resources and Crop Evolution (2005) 52: 293–303 # Springer 2005 Market-based incentives for conserving diversity on farms: the case of rice landraces in Central Tarai, Nepal D. Gauchan 1 , M. Smale 2, * and P. Chaudhary 3 1 Agricultural Economist, Nepal Agricultural Research Council (NARC), P.O. Box 5459, Kathmandu, Nepal; 2 International Plant Genetic Resources Institute (IPGRI), International Food Policy Research Institute (IFPRI), 2033 K Street, N.W., Washington D.C., USA; 3 Field Officer, Local Initiative for Biodiversity Conservation (LIBIRD), Pokhara, Nepal; *Author for correspondence (e-mail: m.smale@cgiar.org; phone: 202-862-8119) Received 27 January 2003; accepted in revised form 13 July 2003 Key words: Landraces, Market incentives, Nepal, On-farm conservation, Rice diversity Abstract Market-based incentives are one means of encouraging farmers to grow landraces that are also of social value, thereby contributing to the conservation of crop genetic diversity on farms – and in principle, the cheapest. This study uses a participatory, market systems approach supplemented by baseline data from an ongoing project to analyze markets for rice landraces and modern varieties in Nepal. Nepal is located in the area of origin and diversity for Asian rice. With the exception of traditional Basmati rice (which is of high aromatic quality), most rice landraces are traded through small-scale informal channels. Traders earn higher profits handling modern varieties than landraces, with the exception of Basmati, which competes with modern varieties. The superior consumption qualities of Basmati are valued in markets, but conserving these landraces may not have great social value. Furthermore, farmers who grow Basmati are clearly better off than those who do not. Findings raise questions about the role of market-based incentives for conserving landraces on farms, the costs entailed in establishing a structure to generate them, and about efficiency vs. equity considerations in the design of conservation programs. Conserving crop genetic resources on farms The genetic improvement of crop plants depends on the exploitation of genetic diversity. Today, in the richer and middle-income societies of the world, the genetic improvement that enhances the quality or quantity of food produced is accom- plished by professional plant breeders. In the poorer nations of the world, in areas that are environmentally heterogeneous or isolated from market infrastructure, many farmers still rely directly on the harvests of the genetic diversity they sow for food and fodder as well as the next season’s seed. Semidwarf varieties now occupy an estimated three quarters of the area in Asia where Oryza sativa L. is believed to have been domesticated, though ancestral varieties can still be found in upland areas (Jackson and Khush 2001; Vaughan and Chang 1992). More heterogeneous than the modern semidwarf varieties that are bred for uni- formity in stature and selected on the basis of particular performance criteria, these ancestral varieties or ‘‘landraces’’ are often adapted to speci- fic local human needs and environmental niches (Simmonds 1979). However, farmers may choose to cease growing either individual landraces or modern varieties if changes in the production or