Cost-effectiveness and resource use efficiency of sweet potato in Bangladesh

Transcription

1 Journal of Agricultural Economics and Rural Development Vol. 2(2), pp , July, ISSN: XXXX-XXXX JAERD Research Article Cost-effectiveness and resource use efficiency of sweet potato in Bangladesh 1* Md. Tanvir Ahmed, 2 Sudhir Chandra Nath, 3 S.S.R.M. Mahe Alam Sorwar, 4 Md. Harun -OR- Rashid 1*,2,3,4 Seed and Agro Enterprise, BRAC, Bangladesh In Bangladesh sweet potato is the 4 th most important source of carbohydrate after rice, wheat and potato. The study was conducted to determine the profitability and resources use efficiency of sweet potato (Ipomoea batatas Poir) in Bangladesh. This study also aimed to find the factors affecting gross return of sweet potato production. A total of 100 farmers were selected from the study area through stratified random sampling technique and face to face interview was conducted to collect primary data. The cost and return analysis indicated that per hectare net return from sweet potato was 82, BDT (Bangladesh Taka). Benefit cost ratio (BCR) was found Labor and vine cost accounted for the 48% and 28% of the total cost, respectively. Cobb-Douglas production function was used to determine the factors affecting gross return of sweet potato. The result showed that farm size, cost of vine, cost of land preparation and cost of labor have positive impact on gross return. Sweet potato cultivation is more sensitive to the output price which can be compensated by increasing yield. Resource use efficiency analysis revealed that farmers are not efficient in using resources in sweet potato production. Vine, land preparation, fertilizer and labor were underused and therefore increase the use of these resources can maximize profit in sweet potato production in Bangladesh. Keywords: Cost-effectiveness, resource use efficiency, sensitivity analysis, sweet potato production INTRODUCTION Sweet potato (Ipomoea batatas Poir) is one of the important root crops in many parts of Asia, Africa and Latin America. Because of its versatility and adaptability, sweet potato ranks as the world s seventh most important food crop after wheat, rice, maize, potato, barley, and cassava (Zuraida, 2003). The crop is highly nutritious and provides generous quantities of vitamin A, vitamin C, Beta carotene and Iron. It is also suitable to be grown in the tropical areas where the large portion of the world s poor people lives. Besides ensuring the food security of the human being, sweet potato is also used as animal feed in many countries. Sweet potato requires few inputs and can be planted in erosion prone areas to protect farmland as it spreads to cover the soil (Kassali, 2011). Sweet potato is also called disaster combating crop as it grows very faster without much cultural management even in the disaster affected areas. In developing countries, sweet potato ranks as the fifth most important food crop on a fresh-weight basis after rice, wheat maize and cassava. It is also considered as a food crop that can be used to alleviate the food shortage and overcome the hunger (Anonymous, 2009). In Bangladesh sweet potato is the 4 th most important source of carbohydrate after rice, wheat and potato. Sweet potato plays a significant role in increasing food security and income for the poor farmers of Bangladesh. Sweet potato is mainly grown in the marginal land of Bangladesh during the period of October to February. It is consumed in different forms mainly boiled, fries and roasted. Sometimes it is also eaten as vegetable in curry. Corresponding Author: Md. Tanvir Ahmed, Seed and Agro Enterprise, BRAC, Bangladesh. tanvir4344@yahoo.com, tanvir.am@brac.net, Phone Number: Ext 3346.

2 Ahmed et al. 026 The leaves and tender shoots of sweet potato are also consumed as vegetables. The leaf contains, on dry mater basis about 8% starch, 4% sugar, 27% protein and vitamins and therefore they are very nutritious (Ohajianya et al. 2014). Sweet potato is extensively grown in all the districts of Bangladesh particularly by the side of rivers and in the char land. In , about 0.31 million metric tons of sweet potatoes were produced from 31.1 thousand ha of land in Bangladesh (BBS, 2010). Bangladesh ranks 23 in the world in terms of sweet potato production in 2011 (FAOSTAT, 2012). Profitability of a crop depends on yield, price of the product, and cost of inputs as well. Any variation in any of the above factors obviously will change the profitability. It is changed over time, place and management level (Begum et al., 2011). Mostly, farmers cultivate traditional varieties of sweet potato in Bangladesh which are good in taste but gives very low yield. Sweet potato gets very less importance in terms of input use and management practices by the farmers. Traditionally farmer uses very fewer inputs specially irrigation, fertilizers and pesticides to cultivate sweet potato. Bangladesh Agricultural Research Institute (BARI) has developed 9 High Yielding Varieties (HYV) of sweet potato having potential yield of 35 tons per hectare. But the average national yield of sweet potato is around tons per hectare only. It has become an important issue to determine the costeffectiveness and resource utilization efficiency of sweet potato. This study may help the policy maker of the country to take necessary action regarding the expansion and resource utilization of sweet potato cultivation. Though there are huge potential of sweet potato to address the food security of Bangladesh but there are limited number of study found on sweet potato production and its resource utilization efficiency. This study aims to determine the productivity, profitability and resource use efficiency of sweet potato in two districts of Bangladesh. MATERIALS AND METHODS The study was carried out during January 2013 to August 2013 in two major sweet potato growing districts of Bangladesh namely Jamalpur and Netrokona. Shorisabari and Sadar upazila (Sub-district) were purposively selected for the study from Jamalpur and Netrokona district, respectively. Stratified random sampling technique was used to identify the sample farmers. Not all farmers from the study area cultivate sweet potato. Hence, they were stratified into two groups; sweet potato cultivars and non-sweet potato cultivars. Sample farmers were randomly selected from the sweet potato cultivar group. A total of 100 farmers that is 50 from each district were taken for the study. A questionnaire was prepared for collecting information from the sample farmers. Primary data were taken regarding the socio-economic characteristics of sample farmers, input used in sweet potato cultivation, cost of different inputs, prices of output and yield of sweet potato through field survey. Descriptive statistics (mean, average, percentage etc.) and tabular analysis was done to analyze the data. Profitability of sweet potato was examined on the basis of gross return, net return and benefit cost ratio (BCR). Cobb-Douglas form of production function was used to determine the effects of key variables to the production of sweet potato. Statistical software (STATA 12) was used to do the regression analysis. The Cobb-Douglas production function model is as follows: Y = ax1 b1 X2 b2 X3 b3 X4 b4 X5 b5 X6 b6 X7 b7 eui... (1) The function was transformed into the following double log or log linear form; ln Y = ln a + b1ln X1 + b2ln X2 + b3ln X3 + b4ln X4 + b5ln X5 + b6ln X6 + b7ln X7 + Ui Where, Y = Gross return (BDT/ha) X1 = Age of farmer (years) X2 = Experience of sweet potato cultivation (years) X3 = Farm size (ha) X4 = Cost of vine/planting materials (BDT/ha) X5 = Cost of land preparation (BDT/ha) X6= Cost of fertilizer (BDT/ha) X7 = Cost of labor (BDT/ha) a = Intercept b1, b2, b3, b4, b5, b6, b7, = Production coefficient of the respective variable inputs Ui = Error term Calculation of resource use efficiency: To accomplish the objective of profit maximization for efficient allocation of resources, one should use more of the variable resource so long as the value of the added production is greater than the cost of the added amount of the resource used in producing it. The standard way to examine such efficiency is to compare marginal value product (MVPs) with marginal factor costs (MFCS) of each variable input. Resource use efficiency of an input is calculated using the basic economic formula; MVP/MFC=1 The resource is considered to be efficiently used as well as profit will be maximized when the ratio of MVP to factor MFC approaches one, if in other words MVP and MFC for each input are equal. If the ratio is greater than 1, the resource is underused and the gross return could be increased by using more of the resource and if it is

3 J. Agric. Econ. Rural Devel. 027 Table 1. Socioeconomic Characteristics of respondents Items Frequency Percentage (%) Mean Age (years) (12.86) and above Total 99 (one value missing) 100 Literacy level Illiterate N/A Primary (Class I-V) Secondary (Class VI-X) Higher Secondary (HSC) > 4 4 Total Experience of Sweet potato farming (Years) (9.36) > 8 8 Total Average Family size (person/household) 5.24 (1.89) Farm Size distribution (Decimal) Land less farmer (0-50) (110.46) Marginal farmer (51-100) Small farmer ( ) Medium farmer ( ) Large farmer (401> 4 4 Total Irrigation use Yes N/A No Chemical use Yes 4 4 N/A No less than 1, the resource is overused and the excess use of resource should be decreased to minimize the loss (Taru, 2008). When marginal physical product is measured in monetary term then it is called Marginal Value Product (MVP). But in this model, MVP is estimated in terms of an additional BDT invested on individual inputs. According to Dhawan and Bansal (1977), the useful estimate of MVP is obtained by taking the geometric mean of the resources (xi) as well as the gross return. MVP is calculated by multiplying the coefficient of a given resource with the ratio of the geometric mean (GM) of gross return to the GM of the given resource. Thus; MVP (xi) =bi. (Y / Xi) Where bi = Regression co-efficient Y = Mean value (GM) of gross return in BDT Xi = Mean value (GM) of different resources in BDT

4 Ahmed et al. 028 Table 2. Per hectare cost and return of sweet potato production Item Mean Value (BDT) Percentage (%) Vine/Planting materials Land preparation Irrigation Fertilizer Chemical (Pesticides/Insecticides) Labor Interest on operating capital (12% for the period of 4 months) Total cost Yield (Kg) 23,126 Unit price (BDT/Kg) 7.25 Gross return (GR) Net return (NR) Benefit cost ratio (BCR) 1.97 Source: Field survey and Author s calculation, 2013; 1 USD = 80 BDT i= (1, 2, 3..n) GM = Geometric mean The equation can also be written as; dy/dxi = bi. (Y / Xi) Where, dy/dxi = slope of the production function = Marginal Value Product (MVP) Since, all the inputs and outputs were expressed in monetary terms, the acquisition cost of the inputs was taken as one BDT. The criteria used here to assess the resource allocation efficiency are to test the MVPs against MFC (Heady and Dhillon, 1988). RESULTS AND DISCUSSION Socioeconomic characteristics of the respondents Socio-economic characteristics of the farmers are important in influencing farm decision making and production planning. In this present study the socioeconomic characteristics found are not homogenous (Table 1). Most of the sweet potato farmers belonged to the age group and years. The average age of the sweet potato farmer was 43 years. 51% of the farmers were found illiterate while 33% have only primary education, which may hinder the effectiveness of any extension of modern sweet potato production technologies (Kassali, 2011). The average experience of sweet potato cultivation is 13.5 years, indicates the knowledge of sweet potato production techniques by the producers. Average family size was found is The average farm size was about 132 decimal (0.50 ha). But, 30% of the respondent farmers have less than 50 decimal of land and they are considered as land less farmer. More than 80% of the farmers having land size less than 1 hectare, making sweet potato production a small scale enterprise. On the other hand only 11% of the respondent farmers used irrigation while only 4 % applied chemical, which indicates poor cultural management and ignorance of modern technology. The results imply that more extension efforts are needed for adaption of improved cultural practice of sweet potato. Cost and return analysis A farm earns profit when its net return is above its total costs that means when the benefit cost ratio (BCR) is greater than 1. Profitability is the main aim of any farm (Majumder et al., 2009). During harvest period the average price of sweet potato was 7.25 BDT per Kg. The average yield was 23,126 Kg/ha (23.12 tons/ha). The Gross return was found to be BDT 167,663.5 per hectare while the total cost was 84, BDT/ha. Hence the average net return of sweet potato production was 82, BDT/ha, indicating sweet potato production is profitable (Table 2). Almost same amount of gross return from sweet potato was found by Begum et al. (2011) in her study. Labor cost accounted for 48.4 % of the total cost followed by vine/planting materials cost (27.5%). Irrigation and Chemical cost accounted for only a minimal of 0.36 % and 0.04 %, respectively. This is because, there are only 11% and 4 % farmer used irrigation and chemical, respectively to produce sweet potato. The BCR, on full cost basis, was found 1.97 which indicates that sweet potato production is economically profitable in the study area and generates almost double return of the total investment. Sensitivity analysis Cost, yield and output price can affects the profitability of sweet potato production. This study found that profitability is more sensitive to the change in yield and output price

5 J. Agric. Econ. Rural Devel. 029 Table 3. Relative effect of change of total cost, yield, output price and input cost on the profitability Changes Change in Profitability (%) Total cost (Increased by 10%) Total Profit decreased by 10.25% Yield (decreased by 10%) Profit decreased by 20.26% Output Price decreased by 10% Profitability decreased by 20.26% Labor cost increased by 10% Profitability decreased by 4.97% Vine/planting materials cost increased by 10% Profitability decreased by 2.82% Table 4. OLS estimates of sweet potato production using the Cobb-Douglas function Variables Coefficient t- ratio P-value Constant Age ** Year of experience Farm size *** Cost of vine *** Cost of land preparation *** Cost of fertilizer ** Cost of labor *** R-square 0.65 Adjusted R-square 0.62 F-value 20.80*** Return to scale 1.47 *** Significant at 1% level, ** Significant at 5% level Table 5. MVPs of inputs/resources in production function Resources Geometric mean (BDT) Co-efficient MVP Gross return Vine/Planting materials Land preparation Fertilizer Labor of sweet potato (Table 3). If output price decreased by 10%, the profitability will be decreased by more than 20%, on the other hand if yield is decreased by 10%, profitability will also goes down by 20.26%. A 10% increase in labor and vine/planting materials cost would results 4.97% and 2.82% reduction in profit, respectively. While a 10% increase in total cost will reduce the total profit by 10.25%. Sweet potato farmers would likely be more affected by output price and cost of labor which can be compensated by increasing yield (Kassali, 2011). Sweet potato production function In order to estimate the effects of various factors for the production of sweet potato a log-linear (Cobb-Douglas) production function model was chosen, because of its best fit. The estimated Cobb-Douglas production function shows an F value of which is significant at 1% level (Table 4). The value of the Adjusted R-square is 0.62 indicates that 62% of variability of gross return can be explained by the explanatory variables used in the model. Farm size, cost of vine, cost of land preparation and cost of labor were found highly significant at 1% level and have positive impact on gross return while age of the farmer and cost of fertilizer were found significant at 5% level. We did not use the irrigation cost and the chemical cost as explanatory variable in the model, because only 11% and 04% of the respondent farmers used irrigation and chemical, respectively to produce sweet potato. The summation of all the production co-efficient indicates returns to scale. We found returns to scale of 1.47 (>1) which means that production function exhibit increasing return to scale. The increasing return to scale indicates that the current scale of sweet potato production is insignificant and there is room to increase the productivity through an increase in scale (Kassali, 2011). Resource use efficiency Resource use efficiency means how efficiently farmer can use his resources in production process. It is important to ensure efficient use of resources, because resources are

6 Ahmed et al. 030 Table 6. Analysis of resource use efficiency Resources MVP MFC Efficiency Ratio Conclusion Vine/Planting materials Underutilize Land preparation Underutilize Fertilizer Underutilize Labor Underutilize always limited (Majumder et al., 2009). For calculating resource use efficiency this study considers four factors which are vine/planting materials, land preparation, fertilizer and labor. The estimated MVP of different resources for sweet potato is presented in Table 5. MFC is the price of per unit of resources. In this study MFCs for all resources expressed in terms of additional BDT, in calculating the ratio of MVP to MFC. The efficiency ratio for given resources is greater than 1, hence all the resources were underutilized (Table 6). That means the sample farmers used less inputs than the optimal. There is scope for the farmer to increase the use of all selected resources to maximize gross return. CONCLUSION AND RECOMMENDATION Sweet potato production is a profitable venture for the farmers. This study found that famers are getting almost double return than the cost of sweet potato production. The profitability of sweet potato production is more sensitive to the market price of output during the harvesting period. Farmer can compensate the risk of low market price of output by increasing the yield. Farmers are using mostly traditional variety of sweet potato and getting yield around 23 tons per hectare. But the potential yield of high yielding variety of sweet potato is around 35 tons per hectare. Moreover farmers are not using their resources efficiently. Vine/planting materials, land preparation, fertilizer and labor are underused in the study area. The profitability as well as the gross return can be increased by applying more resources until it reaches to the optimum level. Again, farmers are very ignorant of using irrigation and chemicals which also leads to lower yield of sweet potato. From the result of the study it is recommended that farmer should use high yielding variety of sweet potato and optimize the resource use in sweet potato production. ACKNOWLEDGEMENT The Author is very much grateful to International Fund for Agricultural Development (IFAD) and International Potato Centre (CIP) for granting fund to undertake this research. REFERENCES Anonymous (2009). Sweetning lives with sweetpotato. CIP Nwsl. 2(3):1 ( cipotato.org/publications/newsletter/2009_10- newsletter.pdf) BBS (2010). Statistical Yearbook of Bangladesh, Bangladesh Bureau of Statistics. Planning Division, Ministry of Planning, Government of the People s Republic of Bangladesh, Dhaka, Bangladesh. BBS (2011). Agricultural Statistical Yearbook of Bangladesh, Bangladesh Bureau of Statistics; Chapter-3.pdf Begum MEA, Islam MN, Alam MQ and Hossain SMB (2011). Profitability of some BARI released crop varieties in some locations of Bangladesh, Bangladesh Journal of Agricultural Research, 36(1): Dhawan KG and Bansal PK (1977). Rationality of the use of various factors of production on different of farming in Panjab, Indian Journal of Agricultural Economics, 32(3): FAOSTAT (2012). Food and Agriculture Organization, Heady EO and Dillon JL (1988). Agricultural Production Functions. Kalyani Publishers. New Delhi, India. Kassali R (2011). Economics of Sweetpotato Production. International Journal of Vegetable Sciences. 17(4): , DOI: / Majumder KM, Mozumder L, Roy PC (2009). Productivity and Resource Use Efficiency of Boro Rice Productin. Journal of Bangladesh Agricultural University. 7(2): Ohajiana DO, Otitolaiye JO, Saliu, OJ et al. (2014). Technical Efficiency of Sweet Potato farmers in Okene Local Government Area of Kogi State, Nigeria. Asian Journal of Agricultural Extension, Economics and Sociology. Rahman MM (2011). Country Report: Bangladesh. ADBI- APO Workshop on Climate Change and its Impact on Agriculture. Seoul, Republic of Korea. Taru VB, Kayaga IZ, Mishelia SI and Adebayo EF (2008). Economic Efficiency of Resource Use in Groundnut Production in Adamaoya State of Nigeria, World Journal of Agricultural Sciences, 4(5): Zuraida N (2003). Sweet potato as an alternative food

7 J. Agric. Econ. Rural Devel. 031 supplement during rice storage, J. Lubang Pertanian, 22(4): Accepted 06 July, 2015 Citation: Ahmed MT, Nath SC, Sorwar MA, Rashid MH (2015). Cost-effectiveness and resource use efficiency of sweet potato in Bangladesh. Journal of Agricultural Economics and Rural Development, 2(2): Copyright: Ahmed et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are cited.