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Financial and Economic Profitability of Selected Agricultural Crops in Bangladesh. Institution: Department of Management and Finance Sher -e- Bangla Agricultural University (SAU) Principal Investigator: Dr Mohammad Mizanul Haque Kazal Department of Development & Poverty Studies SAU.
Department of Management and Finance
Sher-e-Bangla Agricultural University (SAU)
Dr Mohammad MizanulHaqueKazal
Department of Development & Poverty Studies
The study was designed to conduct into three phases
Phase-Ideals with farm level survey, financial and economic cost and return analysis and assessment of comparative advantages of crops;
Phase-IIdeals with assessing the impact of fertilizer subsidies on profitability using experimental data as well as farm-survey data for rice only;
Phase-III measure the changing patterns of agricultural land use and identifies its socio-economic determinants using through the secondary time-series data.
Phase 1: Financial and economic profitability of the various crops AND an assessment of comparative advantage for import substitution and/or export
1. Financial and economic costs and returns from crops
2. Assessment of comparative advantage of crops
Policy Analysis matrix (PAM) framework applied to measure economic efficiency and competitiveness under different production systems
Cost and return analysis is the most common method of determining and comparing the profitability of different farm enterprises. In estimating the level of profitability in crop production the following formula was used:
∏ = P1Q1 + P2Q2 - ∑PiXi– TFC
∏ = Profit per hectare for producing the crop;
P1 = Per unit price of the output; Q1 = Quantity of output obtained (per hectare);
P2 = Per unit price of by-product; Q2 = Quantity of by –product obtained (per hectare);
Pi = Per unit price of the ith input used for producing the crop; Xi = Quantity of the ith input used for producing the crop; and
TFC = Total fixed cost.
Phase2: Assess the Impact of fertilizer subsidies on financial profitability and production
This analyses was done by using two different approaches such as
(1) by using the experimental data from BRRI, and
(2) by using farm-survey data collected in Phase 1.
Approach 1: Using experimental data from BRRI
First step is to find the yield / profit maximizing level of N fertilizer use.
A profit function approach will be adopted to examine the impact of fertilizer subsidies on profitability of rice farming. The general form of the translog profit function, dropping the subscript for the farm, is defined as:
The corresponding factor share equations are expressed as,
Phase 3: Socio-Economic and Environmental Determinants of Crop Diversity in Regions of Bangladesh (1990-2008)
The study were used a model of crop choice in a theoretical framework of the farm household model applying a micro-econometric approach.
The study was computed growth rate of area cultivated for individual crop using semi-log trend function as follows:
Policy Analysis Matrix for rainfed Aman rice in southern region of Bangladesh (Average of 2010 and 2011):
Table. Yield response function of rice using economically optimum dose of urea fertilizer
Results indicate that the experimental level of urea fertilizer use is far lower than the economically optimum level of urea fertilizer for Aman and Boro seasons but higher for Aus season. The discrepancy is highest for HYV Boro rice where the profit maximizing level of N fertilizer dose is 232.4 kg/ha as compared to only 125.7 kg/ha. Also, production elasticity of HYV Boro rice is highest at 0.48, implying that a one percent increase in the optimum dose of N fertilizer will increase rice yield by 0.48% which is substantial. Changes in price of urea will exert some reduction in the optimum doses of urea fertilizer only in Aman season with no noticeable effect on Boro and Aus season.
Results demonstrate that other than area under modern rice, vegetables and spices, all other crop areas experienced significant decline at variable rates over time.
Both extension expenditure and R&D investment significantly positively increases crop diversity which is very encouraging indeed and the government should seriously increase investment in these two policy amenable instruments.