Milk Production and Resource Use Efficiency in Madurai District of Tamil Nadu: An Economic Analysis

Transcription

1 Journal of Community Mobilization and Sustainable Development Vol. 6(1), , January-June, 2011 Milk Production and Resource Use Efficiency in Madurai District of Tamil Nadu: An Economic Analysis P. Venkatesh 1 and V. Sangeetha 2 1 Directorate of Seed Research (ICAR), Mau , U.P. 2 Division of Agricultural Extension, IARI, New Delhi ABSTRACT A study was conducted to examine the cost structure and resource use efficiency of dairy farms at the Madurai district of Tamil Nadu. The dairy farmers were selected by using multi stage random sampling technique. Tabular analysis and Cobb-Douglas production function were used in this study. Total costs per lactation per animal estimated were of the order of Rs , Rs and Rs and returns per rupee of investment 0.78, 1.08 and 0.95 respectively on small, large and pooled farms. Feed cost was the higher input cost in dairy farming (61.6%). The cost of production milk per litre was less in case of large farms (Rs. 4.62) compared to small farms (Rs. 5.39). Results indicated the inverse relationship with the size and the herd of the total costs, due to economies of scale. Functional analysis showed barring human labour on small farms all the selected input variables such as green fodder, dry fodder, concentrates and health care were positive and significant impact on the production of milk indicating the potentiality of their further use. Key words: Milk production, Resource use efficiency, Economic analysis INTRODUCTION Among the many livestock enterprises, dairying is the easiest occupation established in the rural setting of our country. Dairy husbandary provides draught power, manure and cash income and augments the crop production. It is increasingly recognized that dairying could play a more constructive role in promoting rural welfare and reducing poverty. Madurai, one among the districts of Tamil Nadu constitutes more than 75 per cent of the rural population, whose main occupation is agriculture and allied activities like dairying, goat rearing and poultry keeping, etc. Though dairying is being effectively practiced, the information on cost and incomes from milk production and productivity of different factors is scanty, which is most important from producer point of view who under takes dairying as a new enterprise. It is in this context the study was undertaken an in-depth study on economics of milk production in various herd size categories of different households in Madurai District of Tamil Nadu, with the specific objectives to estimate the costs and returns of production of milk and to analyse the factors affecting the milk yield. MATERIALS AND METHODS Sampling and Data collection: Multistage stratified sampling technique was adopted to select the sample required for study. Madurai district was purposively selected for this study, as it is one of the major milk producing districts of Tamil Nadu. Besides, this district has well established milk co-operative unions with 547 milk co-operative societies and provides good marketing facilities in the disposal of milk by the farmer. There is a well established communication net work among major cities of the state and other states. Out of 13 blocks in Madurai district top two blocks and from each block two villages were purposively chosen for the study order of their bovine population. were selected purposively based on the highest bovine population. A sample of 30 small farmers (1-3 animals)

2 26 P. Venkatesh and V. Sangeetha and 30 large farmers (4-6 animals) was randomly selected in non-probability proportion to their number in each size group from the selected villages. The primary data on different aspects of the study were collected from the selected respondents with the help of well-structured, pre-tested schedule by survey method. b) Analytical procedure i) Tabular analysis: Tabular analysis was employed to work out the costs and returns of the dairy enterprise, profitability of milk production. ii) Functional Analysis: Both Cob - Douglas and linear production functions were employed to study the resource use efficiency on sample dairy farms. Cobb- Douglas production function was found to be more appropriate than linear function as revealed by its better fit. As such, Cobb - Douglas production function was applied to the input - output data to estimate the resource productivity and returns to scale. Thus, resource productivity and returns to scale were estimated through the Cobb-Douglas production function as given below for n independent variables. b 1 b 2 b 3 Y = Ax 1 X 2 X 3.. X n e uj In logarithms, the function is of the following form: log Y = log A + b 1 log X 1 + b 2 log X 2 + b 3 log X 3 + b 4 log X 4 + b 5 log X 5 where, Y = Milk yield in litres per animal per day X 1 = Green fodder in kg per animal per day X 2 = Dry fodder in kg per animal per day X 3 = Concentrates in kg per animal per day X 4 = Human labour in man days per animal per day x 5 = Health care in rupees per animal per day A = Constant The elasticities b 1,b 2,. b n indicate the percentage change in the output due to one per cent change in the particular input, while all other inputs are kept constant. The sum of elasticities indicates returns to scale viz., the percentage change by which the output would change due to one per cent simultaneous change in all the inputs included in the function Production elasticities for individual inputs and sum of elasticities were worked out and tested for significance at 1, 5 and 10 per cent level of probability. iii) Regression coefficients: For testing the significance of regression coefficients, t test was employed using the formula ; t = SE of Where, = regression coefficient of input x i S.E of = standard error of b i iv) Optimum level of input: It was worked out by using the following formula K * X j = P j [b 1 +b 2 + ] where, X i * = Optimum level of X j th input K = Variable cost due to use of inputs, b 1.. th P i = Price of i j input = Elasticity co-efficient of j th input RESULTS AND DISCUSSION Cost structure in milk production: The profitability of an enterprise depends upon its income generating capacity and structure. Total costs are discussed under two categories viz., variable costs and fixed costs. In general, variables costs alone reckoned for working out the cost of production by the farming community, ignoring fixed costs. But in the economic analysis of a farm business enterprise, the fixed costs are necessarily to take into account to arrive at the total costs and compute the returns therefore. The costs incurred per animal per lactation are presented in Table 1. Total costs were of the order of

3 Milk Production and Resource Use Efficiency in Madurai District 27 Table 1. Cost structure in milk production on sample farms (per animal per lactation) (in Rupees) S. Particulars Small farms Large farms Pooled farms No. Amount % Amount % Amount % I. Variable cost 1. Human Labour Owned Permanent Total Feed &Fodder cost Health care charges Miscellaneous charges Interest on working capital Total variable costs II. Fixed cost 1. Depreciation on fixed capital Interest on fixed capital Depreciation on animal Interest on the value of animal Total fixed costs Total costs Rs , Rs and Rs on small, large and polled farms respectively. Total costs exhibited inverse relationship with the size of the herd, due to economies of scale. Among the variable costs, feed and fodder cost were found to be the higher cost component with Rs (61.60%), Rs (66.91%) and Rs (65.30%) on small, large and pooled farms, respectively. Human labour was the next component with Rs (17.38%) Rs (12.82%) and Rs (14.32%) on the corresponding farms. When looked at the employment of family labour, it was relatively more on small farms compared to large farms due to availability of family labour. Miscellaneous charges including artificial insemination amounted to Rs , Rs , and Rs on small, large and pooled farms respectively. Among the fixed costs, interest on the value of animal was found to be the higher and followed by depreciation of animal in all the farms irrespective of the farm size. It can be summarized that the feed cost was the higher input cost in dairy farming. It included green fodder, dry fodder and concentrates. Small and large farmer spent more or less the same amount on feeds and fodder. The sample demonstrated that small farmers were as concerned as that of large farmer in providing feeds. Family labour participation was relatively more on small farms over large farms. Regarding health care, what ever spent on medical care by sample farmer is not sufficient and hence it is desirable to give more attention to health care and save milch cattle from the prone of diseases. Cost of production of milk (per litre): As seen from the Table 2 the average milk yield stood at litres on small farms, on large farms and on pooled farms and the total cost of milk production was found to be less for large farms and higher for Table 2. Cost of production of milk (per litre) Particulars Small Large Pooled farm farm farm Average milk yield (litres) per animal / lactation Total cost (Rs.) Cost of production/litre (Rs.)

4 28 P. Venkatesh and V. Sangeetha Table 3. Returns from dairy farm per animal per lactation (in Rupees) Sl.No. Particulars Small farms Large farms Pooled farms 1. Returns from milk (95.57) (93.51) (93.75) 2. Value of FYM (2.21) (2.21) (2.20) 3. Value of calves (1.98) (1.98) (1.91) 4. Appreciation on animal (2.25) (2.25) (2.14) 5. Total returns (100.00) (100.00) (100.00) 6. Total cost Variable cost Gross margin Net returns Rate of return Note: Figures in parenthesis indicates percentage small farms. The cost of production milk per litre was less in case of large farms and higher for small farms. The less cost was due to economies of large scale arising from large herd size. Returns from dairy farm per animal per lactation: Returns from dairy enterprise are comprised of income from milk, FYM, calves and also the appreciation on animal (Table 3). The returns were computed per animal per lactation. Other sources of income from dairy farm were income from FYM, income from sale of calves and appreciation on the animal. Returns per rupee of investment worked out to 0.78, 1.08 and 0.95 respectively on small, large and pooled farms. Returns analysis showed that large farms were better placed compared to small farms regarding net income and returns over working costs. The large farms evidently received better income and could able to reduce the cost comparatively. It is due to higher milk yield in large farm because of large herd size and better management practices. Economics of milk production per litre: The cost of production per litre of milk was estimated at Rs on small followed by Rs.4.62 on large farms and Rs.4.87 on pooled farms (Table 4) Net returns per litre of milk came to Rs.3.61, Rs.4.38 and Rs on the above farms. Large farms by virtue of their relatively lower costs and higher production could generate better returns over small farms. Factors influencing milk production: In order to find out whether the farmers belonging to different size Tale 4. Economics of milk production (per litre) Particulars Small Large Pooled farms farms farms (Rs/Lr) (Rs/Lr) (Rs/Lr) Total costs Sale price Net returns Cost excluding family labour Family labour income groups used the resources at optimum level or not. The elasticity coefficients of different inputs used in the production function were estimated by using Cobb- Douglas production function for the different size groups of farms and results were presented. Small farms: As per Table 5 the co-efficient of multiple determination (R²) was 0.99 indicating that the included variables in the production function explained 99 per cent of variation in the milk production. All the selected variables except human labour were positive and significant. The elasticity of green fodder (X 1 ), dry fodder (X 2 ), concentrates (X 3 ), and health care (X 5 ), were 0.283, 0.089, and respectively. These results indicated that one per cent increase in the variables, keeping others constant at their geometric mean level would increase the milk production by 0.283, 0.089, and per cent respectively. On the other hand, one per cent increase in human labour average level would reduce the milk production by

5 Milk Production and Resource Use Efficiency in Madurai District 29 Table 5. Regression co-efficients of sample farms Coefficients Small Large Pooled Estimated Standard Estimated Standard Estimated Standard values errors values errors values errors Intercept * ** *** b ** *** * b ** ** *** b *** *** *** b * *** ** b *** * ** R bi Note: *Significant at 10% level **Significant at 5% level ***Significant at 1% level per cent because the elasticity coefficient of common labour was found to be negatively significant. Large farms: According to the results presented in Table 5 it is found that the co-efficient of multiple determinations (R²) was duly revealing that the factors included in the function explained 98 per cent of variation in milk production on large farms. The elasticity parameters of all the five input variables were positive and significant. The elasticity parameters for green fodder (X 1 ), dry fodder (X 2 ), Concentrates, (X 3 ), human labour (X 4 ), and health care (X 5 ), were of the order of 0.242, 0.123, 0.319, and respectively. Keeping others constant at geometric mean level, one per cent increase in the aforesaid variables would increase the milk production by 0.242, 0.123, 0.319, and per cent respectively. Pooled farms: As observed from Table 5 it is clear that, the variables included in the function explained variation in the milk production to the extent of 99 per cent. Similar to large farms, on pooled farms also all the selected input variables were positive and significant impact in the production of milk. The elasticity parameters for the five input variables viz., green fodder, dry fodder, concentrates, human labour and health care were 0.107, 0.201, 0.572, and respectively. These results indicate that a one per cent increase in these input variables keeping others constant at their geometric mean levels would increase the milk production by 0.107, 0.201, 0.572, and per cent respectively. Functional analysis showed barring human labour on small farms all the selected input variables were positive and significant impact on the production of milk indicating the potentiality of their further use. Optimum level of input use in milk production on sample farms: The information on the optimum levels of input use given an idea of extent of over use and under use of resources so that necessary adjustments Table 6. Optimum level of input use on sample farms in the production of milk per animal per day S. Inputs Small farms Large farms Pooled farms No. Actual Optimal Actual Optimal Actual Optimal 1. X 1 (kg) X 2 (kg) X 3 (kg) X 4 (man days) X 5 (Rs.)

6 30 P. Venkatesh and V. Sangeetha can be made by the sample farmers. The estimated optimum quantities of inputs against the actual use are presented in Table 6. On small, large as well as pooled farms all the inputs were under utilised compared with the optimal values except human labour use in small farms. This analysis suggests that there is an urgent need to increase the use of all the inputs in the production of milk to the optimal level, so that dairy farmers of the study area can gain much more than what they are presently receiving. In the case of small farmers, human labour use should be reduced as indicated to the optimal level CONCLUSION Total costs were of the order of Rs Rs. 11, and Rs. 12, on small, large and pooled farms, respectively. The average milk yield stood at litres on small farms followed by litres on large farms and litres on pooled farms. Cost of production of milk per litre was Rs on large farms as against Rs on small farms and Rs on pooled farms. The cost of production of milk per litre was less in case of large farms and higher for small farms. Economies of large scale arising from large herd size well displayed on sample farms. The study indicates that in order to go for commercial production reasonable farm size (>3 animals /farm) is required. Total returns from milk were of the order of Rs , Rs and Rs on small, large and pooled farms respectively. Net income accrued was Rs , Rs and Rs for the corresponding farms, respectively. The coefficient of multiple determination (R 2 ) was above 0.98for all the farm size, indicating that the variables included in the function explained 99 per cent of variation in the milk production. All the selected variables were positive and significant impact on milk product except human labour on small farms. On small, large as well as pooled farms, all the inputs were underutilized compared with the optimal values except human labour use in small farms. Hence, farmers can improve the milk yield by additional use of the inputs. REFERENCES Balishter and N.P. Singh A study on cost and returns from buffalo in Agra District of Uttar Pradesh. Livestock Advisor, 20(11): 3-8. Bardhan, D.; Y.P.S. Dabas and R.S.L. Srivastava An economic analysis of milk production from indigenous cows in Udham Singh Nagar District of Uttaranchal. Indian Dairyman, 56(3) Baruah, D.K.; A.B. Sarker and N.N. Bora A study of economics of milk production in Assam. Indian Journal of Dairy Science, 49(1): Chauhan and Gupta Monika Production and disposal of milk in rural areas of Himachal Pradesh - An economic analysis. Indian Journal of Agricultural Marketing, 7(1): Deoghare, P.R. and N.K. Bhattacharya Economics of buffalo milk production in Mathura district of Uttar Pradesh. Indian Journal of Animal Science, 64(12): Gupta, J.N. and S.B. Agarwal Economics of milk production in Himachal Pradesh. Indian Journal of Dairy Science, 49(9): Kumar, S. and S.P. Agarwal Resource use efficiency of milk production in Mathura district of Uttar Pradesh. Indian Journal of Dairy Science, 47(11): Lalwani, N.R. and A.K. Koshta Decomposition analysis of milk yield in members and non-members of milk producers co-operative societies. Indian Journal of Dairy Science, 54(3): Rajendran, K. and R. Prabaharan Resource productivity in dairying. India Journal of Dairy Science, 46(8): Reddy, S.S. and P. Raghuram Technical efficiency of local and crossbred buffaloes. Indian Dairyman, 36(8): Shah D. and P. Singh Resource productivity in milk production for crossbred cows. Dairy Guide, 41(1-3): Sharma, V.P. and R. Singh Resource productivity and allocative efficiency in milk production in Himachal Pradesh. Indian Journal of Agricultural Economics, 48(2): Received on October, 2010, Revised on February, 2011