Potential Effects of Changes in Truck Transportation on the Value of Production and Incomes in Thailand's Rice Agriculture Dennis M
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DAE-CARD Sector Analysis Series CARD Reports and Working Papers 3-1978 Potential Effects of Changes in Truck Transportation on the Value of Production and Incomes in Thailand's Rice Agriculture Dennis M. Conley Iowa State University Chamnong Vathana Division of Agricultural Economics, Ministry of Agriculture and Cooperatives, Royal Thai Government Earl O. Heady Iowa State University Follow this and additional works at: http://lib.dr.iastate.edu/dae-card_sectoranalysis Part of the Agribusiness Commons, Agricultural and Resource Economics Commons, Agricultural Economics Commons, Asian Studies Commons, and the International Economics Commons Recommended Citation Conley, Dennis M.; Vathana, Chamnong; and Heady, Earl O., "Potential Effects of Changes in Truck Transportation on the Value of Production and Incomes in Thailand's Rice Agriculture" (1978). DAE-CARD Sector Analysis Series. 7. http://lib.dr.iastate.edu/dae-card_sectoranalysis/7 This Book is brought to you for free and open access by the CARD Reports and Working Papers at Iowa State University Digital Repository. It has been accepted for inclusion in DAE-CARD Sector Analysis Series by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. Potential Effects of Changes in Truck Transportation on the Value of Production and Incomes in Thailand's Rice Agriculture Dennis M. Conley Chamnong Vathana Earl 0. Heady POTENTIAL EFFECTS OF CHANGES IN TRUCK TRANSPORTATION ON THE VALUE OF PRODUCTION AND INCOMES IN THAILAND'S RICE AGRICULTURE by Dennis M. Conley Chamnong Vathana and Earl 0. Heady The Division of Agricultural Economics Office of the Under Secretary of State for Agriculture Ministry of Agriculture and Cooperatives Royal Thai Government, Bangkok, Thailand in cooperation with The Center for Agricultural and Rural Development Iowa State University, Ames, Iowa 50011 This work was completed under Contract AID/CM/SA-C-73-19 and Grant AID/CSD-2824 DAE-CARD Sector Analysis Series: No. 9 March 19-78 ii FOREWORD A series of planning and analytical models is being developed and applied to Thailand's agriculture through the Division of Agricultural Economics (DAE) of the Royal Thai Ministry of Agriculture and Coopera- tives. This work is assisted by a team of research workers from Iowa State University. This research report estimates the effects of improve- ments in truck transportation specifically on the rice subsector of agriculture and is just one step in developing a transportation sub- model in the national and interregional programming model of Thailand agriculture. This research involved the development of a kingdom- wide transportation model and applying it parametrically. Changes in trucking costs and the potential increase in farm revenue because of the changes in transportation models and costs are evaluated. Other research will be forthcoming as specific studies are made of the markets for rice and other commodities. These market studies include the estimation of demand functions so that the impacts of export and other policies can be better evaluated. Somnuk Sriplung Earl 0. Heady Director, Division of Director, Center for Agricultural Agricultural Economics and Rural Development Royal Thai Ministry of Iowa State University Agriculture and Cooperatives iii TABLE OF CONTENTS Page LIST OF TABLES vi LIST OF FIGURES vii INTRODUCTION 1 Purpose 2 TRANSPORTATION IN THAILAND's AGRICULTURE 4 Description of the Transportation System 6 ' Road transport 6 Railways 6 Waterways and ports 7 Transportation Problems 8 Truck 8 Rail 9 Barge 9 Ocean transport 10 Miscellaneous problems 10 Benefits for the Agricultural Economy 12 MODEL DEVELOPMENT 14 Description of the Model 14 Assumptions of the model 14 Mathematical formulation of the model 15 Region delineation 17 iv Page Supply and Utilization of Rice 17 Supply 19 Utilization 19 Net surpluses and deficits 22 Estimation of Transportation Costs 22 Truck costs 27 Rail costs 31 Barge costs 34 Initial Solution and Verification 36 RESULTS 37 Share of Rice Transported by Truck, Rail, and Barge 37 Value of Rice Production and Value of Rice Production 39 per Rai Northeast 45 North 45 Central and East 45 South 46 Percentage Change in Gross Income from Rice and Net Cash 46 Income from Agriculture Northeast 48 North 48 South 51 Central and East 51 Whole kingdom 55 v Page StJMMAttY 59 BIBLIOGRAPHY 70 APPENDIX 72 vi LIST OF TABLES Page Table 1. Value of leading exports, 1972 5 Table 2. Components of supply and utilization of paddy by 23 province for Thailand, 1971/72 Table 3. Operating factors for ten-, six- and four-wheel 28 trucks Table 4. Estimated annual truck costs for ten-, six- and 28 four-wheel trucks Table 5. Estimated unit truck costs for ten-, six- and four 29 wheel trucks Table 6. Barge costs by region and for the Kingdom of Thailand 35 in 1966 Table 7. Average incomes from agriculture per agricultural 47 household by regions, 1970 and 1971 Appendix Tables 68 Table 1. Change in value of rice production with changes in 69 truck costs Table 2. Change in value of rice production per rai with changes 70 in truck costs Table 3. Percentage changes in gross income from rice on the 71 average farm with changes in truck costs, 1970 Table 4. Percentage changes in gross income from rice on the 72 average farm with change in truck costs, 1971 Table 5. Percentage changes in net cash income from agriculture 73 on the average with changes in truck costs, 1970 Table 6. Percentage changes in net cash income from agriculture 74 on the average farm with changes in truck costs, 1971 vii LIST OF FIGURES Page Figure 1. Comparative Transit Times for Truck, Rail, and 11 Barges Figure 2. THAILAND: Provinces and Regions 18 Figure 3. Rice Quantit~ Shipped by Mode with Changes in Truck 38 Costs Figure 4. Change in Value of Production and Value of Produc 40 tion per Rai in the Northeast with Percentage Change in Truck Costs Figure 5. Change in Value of Production and Value of Pro 41 duction per Rai in the North with Percentage Change in Truck Costs Figure 6. Change in Value of Production and Value of Pro- 42 duction per Rai in the Central with Percentage Change in Truck Costs Figure 7. Change in Value of Production and Value of Pro- 43 duction per Rai in the East with Percentage Change in Truck Costs Figure 8. Change in Value of Production and Value of Pro- 44 duction per Rai in the South with Percentage Change in Truck Costs Figure 9. Northeast Region - Percentage Changes in Gross Income 49 from Rice and Net Cash Income from Agriculture on the Average Farm with Changes in Truck Costs Figure 10. Northern Region - Percentage Changes in Gross Income 50 from Rice and Net Cash Income from Agriculture on the Average Farm with Changes in Truck Costs Figure 11. Southern Region - Percentage Changes in Gross Income 52 from Rice and Net Cash Income from Agriculture on the Average Farm with Changes in Truck Costs viii Page Figure 12. Central Region - Percentage Changes in Gross 53 Income from Rice and Net Cash Income from Agricul- ture on the Average Farm with Changes in Truck Costs Figure 13. Eastern Region - Percentage Changes in Gross 54 Income from Rice and Net Cash Income from Agricul- ture on the Average Farm with Changes in Truck Costs Figure 14. Whole Kingdom - Percentage Change in Gross 56 Income from Rice and Net Cagh· Income from Agricul- ture on the Average Farm with Changes in Truck Costs Figure 15. Relative Changes in Value of Rice Production by 61 Region with a Truck Cost Decrease of 30 Percent 1970 Figure 16. Relative Changes in Value of Rice Production per Rai 61 by Region with a Truck Cost Decrease of 30 Percent, 1970 Figure 17. Relative Changes in Net Cash Income from Agricul- 62 ture on the Average Farm by Region with Truck Cost Decreases of 30 Percent, 1970 Figure 18. Relative Changes in Net Cash Income from Agricul- 63 ture on the Average Farm by Region with Truck Cost Decreases of 30 Percent, 1971 Figure 19. Relative Changes in Gross Income from Rice on the 65 Average Farm by Region with Truck Cost Decreases of 30 Percent, 1970 Figure 20. Relative Changes in Gross Income from Rice on the 66 Average Farm by Region with Truck Cost Decreases of 30 Percent, 1971 ix PREFACE The agricultural economy of Thailand has a tremendous development potential for providing food to the people of Thailand, their Asian neighbors, and the rest of the world. But, the progressive development of an agricultural economy in any country is a slow process requiring many different ingredients to achieve real gains. Thailand is no excep tion. One of these ingredients is the provision of transportation infra structure and service for the distribution of agricultural commodities. In previous years Thailand allocated almost one-half of total public investment for the building of transportation infrastructure. For the future, substantial levels of investment are intended for additional projects. The increase in the world price of oil also has had an effect on fuel prices and thereby transportation costs. This study briefly describes the transportation system in Thailand, the problems associated with it, and the possible benefits that could accrue to the agricultural sector given improvements in the system. A formal model is then used to evaluate the impact of both truck trans portation improvements and lack of improvements on the value of rice production, income from rice, and net cash income from agriculture for the average size farm in the five geographic regions of the kingdom. This study would not have been possible without the devoted effort and contributions of Kuhn Chamnong Vathana, Miss Amporn Ruayruen, and Kuhn Aran Roogsawang who are agricultural economists in the Division of X Agricultural Economics, Ministry of Agriculture and Cooperatives, Royal Thai Government.