Relative Profitability of Different Aged Betel Leaf Production at Farm Level in Some Selected Areas of Bangladesh

J. Bangladesh Agril. Univ. 3(1): 181-188, 2005 ISSN 1810-3030 Relative profitability of different aged betel leaf production at farm level in some selected areas of Bangladesh

M.R.H. Mridha, H. Jahan and M.M. Murshed Department of Agricultural Economics, Bangladesh Agricultural University, Mymensingh

Abstract

This study was conducted to determine the profitability of betel leaf production in Bangladesh from the view point of different aged Boroj, i.e. new Boroj (1 to 5 years), mid-aged Boroj(6 to 15 years) and old Boroj (above 15 years). Three villages namely Maria, Chaubania and Raipara of Maria. union from Rajshahi district were selected purposively for the study and in total of 120 betel leaf growers were selected as samples by using stratified random sampling technique of which each stratum consisted of 40 betel leaf growers. Primary data were collected from the selected betel leaf growers during the period of January to June 2001. A simple cost and returns analysis was done to determine the profitability of betel leaf production. Further, Cobb-Douglas production function was used to determine the contributions of key inputs to betel leaf production using seven explanatory variables in the model. The annual costs of production of betel leaf per hectare were estimated at Tk. 2,67,260.40, 1,95,879.04 and Tk. 2,06,914.13 for new mid-aged and old Boroj, respectively and corresponding net returns per hectare were Tk. 4,25,625.28, 2,84,670.18 and Tk. 2,58,857.54, respectively The study revealed that betel leaf production was a profitable business. Further, betel leaf production in new Boroj was more profitable than those in mid-aged and old Boroj. Also the estimated R2 and F-value confirm significant use of inputs on betel leaf production and showed increasing returns to scale. ‘'

Keywords: Profitability, Betel leaf, Cost & Return, Cobb-Douglas

Introduction

Betel Leaf (Piper betel L.) is the leaf of vine plant. This crop has been cultivated throughout Bangladesh for centuries and locally known as Pan. Chewing of betel leaf is preferred to the other chewing condiment not only due to its taste and flavour but also due to its various excellent medicinal properties. Betel leaf is a commercially viable crop and had substantial high market potentials in both domestic and foreign market (Ali and Rahman, 1987). There are a several varieties of betel leaf, which are cultivated, but only a few of them, such as Deshi, Bangla, Sanchi and Mitha are generally marketed by the growers. Betel leaf is cultivated in a vast area of Bangladesh. Total area and production of Oeteltleaf in Bangladesh are 15062.75 hectares and 78780 tones respectively in 1999-00 (BBS, 2000). Betel leaf is grown in almost all the districts of Bangladesh. But the districts of Kushtia, Barisal, Sylhet, Rajshahi, Chittagong, and Khulna deserve more attention for higher production of betel leaf than other districts. The government of Bangladesh has been pursuing a crop diversification strategy to reduce dependence on rice cultivation. The fifth five-year plan categorically emphasized the importance of crop diversification on valid agronomic, nutritional and economic reasons. Cultivation of horticultural crops, pulses, oilseeds, fodder and vegetables etc, is steamed in the plan documents (Planning Commission, 1997). But unfortunately, betel leaf, an important minor crop, has not been included in this programme. The climate and natural condition of Bangladesh are suitable for betel leaf production and the crop has great 182 Betel leaf production at farm level in some selected areas of Bangladesh export potential. In recent years, efforts have been made to develop export trade of non- traditional agricultural items like betel leaf, fruits and vegetables, etc. Bangladesh has achieved a remarkable progress in this regard. According to the EPB report she occupies 9th position in terms of the-number of her exportable items. She earned Tk.2,89,69 thousands in 2000-01 fiscal year (Bangladesh Bank, 2002). But a few studies had so far been done on the economics of betel leaf production at farmers level. The present study is thus designed to investigate the relative profitability of betel leaf production at different age and to determine the contribution of key inputs in the production process of betel leaf.

Materials and Methods

The study was conducted at three purposively selected villages namely Maria, Chaubania and Raipara of Maria union from Rajshahi district. A total of 120 farmers were selected from the study area by using stratified random sampling technique, of which each stratum contained 40 betel leaf growers. The strata were based on the age of betel leaf garden, i.e., new Boroj (1 to 5 years), mid- aged Boroj (6 years to 15 years) and old Boroj (above 15 years. The study covered a whole production year, i.e., January to December 2000 and the data were collected during the months of January to June, 2001 by survey method through a predesigned interview schedule.

Both tabular and statistical techniques were used for the analysis of the data. Tabular techniques were applied with the help of averages, percentages, etc. to interpret the data Further, statistical techniques were used as a supplement to the tabular technique. Cobb- Douglas production function analysis was done to determine the effects of some selected inputs namely human labour, bamboo and bamboo sticks, oil cake, straw, insecticides and urea on betel leaf production. The fitted Cobb-Douglas production function was specified as follows: 1x2b2 x 3b3 x4bz tx 5 -x6ba x7 e The function was estimated by In 11= In a + 131 In x1 + In x21 + b3 In x3; +134 In x4ri-b5 In x5;+b6 In x6+137 In x7i+u1 Where, Y= Annual returns from betel leaf production (Tk./ha) a= Constant or intercept value = Cost of labour (Tk./ha) x2 = Cost of bamboo (Tk./ha) x3 = Cost of bamboo's stick (Tk./ha) x4 = Cost of oil cake (Tk./ha) x5 = Cost of straw (Tk.lha) x6 = Cost of insecticides (Tk./ha) x7= Cost of urea (Tk./ha) u1= Error terms i= 1, 2, 3 40 b1, b2, b3, b4, b5, b6, b7= Regression coefficients respective variable Mridha et a/. 183

Relative profitability of growing betel leaf was examined on the basis of gross margin and net return analysis. Gross margin analysis estimates the difference between total return and variable cost. The argument for using the gross margin analysis is that the farmers in general are more interested to know their returns over variable costs. On the,other hand, per hectare net return was arrived at by deducting all cost (variable and fixed) from gross return.

Results and Discussion

Costs of betel leaf production

It was observed that, annual per hectare total costs of betel leaf production were estimated at Tk. 2,67,260.40, 1,95,879.04 and Tk. 2,06,914.13 for new Boroj, mid-aged Boroj and old Boroj, respectively (Table 1). It is also revealed from Table 1 that, the variable costs shared the major parts of the total costs. The per hectare variable costs of betel leaf production accounted for 71.14 percent for new Boroj , 72 percent form id-aged Boroj and 74.86 percent for old Boroj. The corresponding annual total fixed costs per hectare shared 28.86, 28.00 and 25.14 percent, respectively. Betel leaf is a labour intensive crop. As a result among the cost items, human labour cost was the largest single cost item of betel leaf production. Annual total per hectare human labour costs were estimated at Tk. 89,639.20, 65,047.20 and Tk. 81,050.00 which covered 38.35, 33.37 and 35.75 percent of total costs in new, mid-aged and old Boroj, respectively.

Table 1. Per hectare costs for producing betel leaf of mid-aged Boroj in an area of Rajshahi district

New-aged Boroj Mid-aged Boroj _ Old-aged Boroj Percent of Percent of ‘ Percent of Items . Total value Total value Total value gross gross gross (Taka.) (Taka.) (Taka.) expenses expenses expenses A. Variable cost 186061.97 - 69.62 141027.66 72.35 154904.54 68.32 Human labour (hired) 50434.80 18.87 50226.00 25.77 59246.80 26.13 Oilcake _ 35303.32 13.21 24466.05 12.55 20963.47 _ 9.25 Urea 6230.00 2.33 127.98 0.07 2434.74 1.07 TSP 2131.08 0.79 2231.32 1.14 2131.08 0.94

Fertilizers MP 1110.50 0.42 560.60 0.29 3115.30 1.37 Irrigation water 1981.59 0.74 ' 1408.99 0.71 92.83 0.04 Insecticides 2780.36 1.04 4429.32 2.26 3138.31 1.38 Bamboo 26463.94 9.90 19079.76 9.79 22032.20 9.72 Bamboo's sticks 37433.95 14.01 25515.10 13.09 15836.52 6.98 Straws 22192.43 8.31 12982.54 6.66 61772.00 27.24 B. Fixed cost 81198.43 30.38 53888.00 27.65 71840.79 31.68 Human labour -.39204.40 (Family supplied) 14.67 14821.20 7.60 21803.20 9.62 Interest on operating capital 12094.03 4.53 9166.80 4.70 20137.59 8.88 Land use cost 29900.00 11.19 29900.00 15.34 29900.00 13.19 C. Total gross ' expenses(A+B) 267260.4 100 194915.66 100 226745.33 100 Source: Mridha, 2001 184 Betel leaf production at farm level in some selected areas of Bangladesh

Return from betel leaf production

Gross return

To calculate the gross _return from betel leaf production, it was essential to determine all the returns earned from selling betel leaves and other crops, which were grown in the betel leaf garden. Since fluctuation in the prices of betel leaf was evident, the gross returns of betel leaf production were estimated on the basis of four-month average prices and yields.

It is observed from, Table 2 that, the total quantities of betel leaf production were 76,360, 58,116 and 53,920 bira per hectare. It indicates that, the per hectare average yields declined as the Boroj became older. The annual per hectare gross returns of betel leaf production were estimated at Tk. 6,92,885.68, 4,79,585.84 and Tk. 4,75,544.08 in new, mid—aged and old Boroj, respectively. (Table 2). Therefore,. the total return for betel leaf production in new Boroj was higher than that in mid-aged and old Boroj. This is perhaps due to the fact that the owners of new Boroj were generally young farmers. They could do intercultural operation better than others.

Table 2. Gross return from per hectare betel leaf production per year in new, mid-aged and old Boroj

Quantity Value Items Price Bira/Month Total (Bira) Total Return (Tk.) (Taka/Bira)

New Baroj May 16 to Sep. 15 8904 35616 3.49 124299.84 - Sep. 16 to Jan. 14 5772 23088 7.50 173160.00 . Jan. 15 to May 15 4414 17656 22.14 390903.80 Return from other crops (Tk.) _ - - - 4522.00 Total return - 76360 - 692885.68 Mid—aged Boroj May 16 to Sep. 15 7530 30120 3.44 103612.80 Sep. 16 to Jan. 14 4187 16748 6.97 116733.56 Jan. 15 to May 15 2812 11248 21.76 244755.48 Return from other crops (Tk.) - - - 14483.00 Total Return :. 58116 - 479585.84 Old Boroj May 16 to Sep. 15 7530 30120 6.02 181322.4 Sep. 16 to Jan. 14 4114 16456 7.36 121116.16 Jan. 15 to May 15 18.36 7344 21.58 158483.52 Return from other crops _ * - - 14622.00 Total Return - 53920 - 475544.08 Source: Mridha, 2001. Note: Other crops Means date-plan Molasses, Banana, Papya, Bean etc. which were produced in betel leaf garden Mridha et aL 185

Gross margin

Difference between gross return and variable costs is called gross margin. The gross margins of betel leaf production per hectare were Tk.5,06,823.73, Tk.3,38,588.18 and Tk.3,20,689.54 in new, mid-aged and above old Boroj, respectively (Table 3).

Net return

Net return of betel leaf production was calculated by deducting total production costs (Fixed + variable) from the total returns. The net returns (i.e. profit) of betel leaf production per hectare per year were Tk.4,25,625.28, Tk.2,84,670.18 and Tk.2,58,867.54 in new, mid-aged and above old Boroj, respectively (Table 3).

Table 3. Gross margin and net returns of betel leaf production in new, mid-aged and old Boroj in an area of Rajshahi district Items Units New Boroj Mid-aged Boroj Old Boroj A) Gross return Tk./ha 6,92,885.68 4,79,585.84 4,75,544.08 B) Variable cost Tk./ha 1,86,061.97 1,41,027.66 1,54,904.54 C) Fixed cost Tk./ha 81,198.43 53,888.00 61,772.00 D) Total cost(B+C) Tk./ha 2,67,260.40 1,94,915.66 2,16,676.54 Gross Margin (A-B) Tk./ha 5,06,823.73 3,38,558.18 3,20,639.54 Net Return (A-D) Tk./ha 4,25,625.28 2,84,670.18 2,58,867.54 Source: Mridha, 2001

The results presented in Table 3 clearly indicate that betel leaf production was highly profitable. New Boroj gave the highest amount of net returns (Tk.4,25,625.28). On the other hand, old Boroj yielded the lowest amount of net returns (Tk.2,58,867.54). So, at initial stage of production, it gives higher amount of profit.

Interpretation of the estimated production function Estimated values of the coefficients and related statistics of Cobb-Douglas production functions of betel leaf in new, mid-aged and old Boroj are shown in Table 4. The interpretation of the estimated values are presented below:

The regression coefficients of human labour (x1) were positive. They were significant at 1 percent for new and mid-aged Boroj and 5 percent level for old Boroj. The regression coefficients indicate that 1 percent increase in labour cost, keeping other costs constant, gross returns would increase by 0.414 percent of new Boroj, 0.918 percent of mid-aged Boroj and 0.618 percent of old Boroj. The regression coefficients of bamboo (x2)were also positive and significant. For new Boroj the co-efficient was significant at 1 percent level, but for mid- aged and old Boroj, the coefficients were significant at 5 percent level. The result of the analysis indicates that 1 percent increase in the cost of bamboo, keeping other costs constant, would result is an increase in gross returns by 0.214, 0.406 and 0.388 percent of new, mid-aged and old Boroj,.respectively. For Bamboo sticks (x3), the regression coefficient was positive for new Boroj and significant at 5 percent level. On the contrary, in mid-aged and old Boroj, the regression coefficients were negative and significant at 1 and 10 percent level, 186 Betel leaf production at farm level in some selected areas of Bangladesh respectively. The regression coefficient of bamboo sticks suggests that 1 percent increase of the cost of bamboo sticks, keeping other costs constant, would result in an increase of gross return by 0.424 percent. On the other hand for mid-aged Boroj and old Boroj, 1 percent increase of the cost of bamboo sticks, keeping other costs constant, would result in a decrease of gross returns by 0.422 and 0.312 percent, respectively. The regression coefficient of oil cake (x4)indicates that 1 percent increase of the cost of oil cake, keeping other costs constant, would increase gross return by 0.336, 0.497 and 0.133 percent in new Boroj, mid-aged Boroj and old Boroj. They were positive and significant at 5 percent level. The coefficient of straw(x6) was positive and significant at 1 percent level in new Boroj. It indicates that 1 percent increase of the cost of straw, keeping other cost constant, would increase gross return by 0.126 percent. In mid-aged Boroj and old Boroj, the coefficients of the straw were positive and significant at 5 percent level, indicating that 1 percent increase of the cost of straw, keeping other costs constant would increase gross return by 0.390 and 0.257 percent, respectively. For insecticides cost the regression coefficients (x6) were negative and significant at 1 percent level for new and mid-aged Boroj. The regression coefficients imply that 1 percent increase of the cost of insecticides; keeping other cost constant would decrease gross return by 0.300 and 0.554 percent in new and mid-aged Boroj, respectively. On the other hand, the regression coefficient was positive and significant at 10 percent level for old Boroj. It indicates that 1 percent increase of the cost of insecticides, keeping other cost constant, would increase gross return by 0.207 percent. Table 4. Estimated values of co-efficient and related statistics of Cobb-Douglas production function of betel leaf Coefficient Explanatory variables New Boroj Mid- aged Boroj Old Boroj Intercept , - '- 192 - ' 3.502. 5.279 ' (0.714) 1.159) (0.875)' Labour (x1) 0.414*** . •0.918*** 0.618** (0.134) (0.212) . (0.137). Bamboo(x2) 0.214*** 0.406** 0.388** (0.066) , (0.112) .. (0.188) Bamboo sticks (x3) 0.242** -0.122*** -0.312* (0.104) (0.172) (0.170) Oil cake (x4) 0.338** 0.497** 0.133** (0.132) (0.142) (0.021) Straw (x6) 0.126*** 0.390** 0.257** (0.044) (0.145) (0.105) Insecticides (x6) -0.300*** -0.554*** 0.207* (0.95) (0.109) (0.112) Urea (x7) 0.056 0.208** 0.305** (0.43) (0.087) (0.92) R2 0.897 0.737 0.855 . F 127.813*** 14.033*** 33.764*** , Return to scale 1.088 1.053 1.596

Note: *** Indicates significant at 1 percent level ** Indicates significant at 5 percent level * Indicates significant at 10 percent level Figures in parenthesis indicate the standard error Mridha etal. 187

The coefficients of multiple determination R2 were 0.897, 0.737 and 0.855 in new, mid-aged and old Boroj, respectively. They indicate that 90, 74 and 86 percent of the variations in gross returns of the respective Boroj were explained by the independent variables included in the model. The F-values of the equations were significant at 1 percent level of confidence, implying good fit of the model in all cases, considered.

Return to scale

The summation of all the regression coefficients of the equation for new, mid-aged and old Boroj were 1.088, 1.053 and 1.596, respectively (Table 4). This implies that if all the inputs specified in the production function were increased simultaneously by 1 percent, the gross return would increase by 1.088, 1.053 and 1.596 percent in new Boroj, mid-aged Boroj and old Boroj. It also implies that the estimated production function exhibited increasing return to scale.

The overall performance of the estimated production function was satisfactory as indicated by the estimated R2 and F-value. The estimated values of the model confirm that most of the selected variables had significant impacts on betel leaf production.

Conclusions

It is revealed from this study that betel leaf production in new, mid-aged and old Boroj were profitable, but betel leaf production in new Boroj gave the highest amount of net return. It was observed that, betel leaf growers faced some problems like lack of adequate operating capital, high prices of fertilizers, low price of betel leaf, transportation problem, lack of storage facility and improved method of cultivation, inadequate extension services, etc. If the problems related to it could be solved, betel leaf production could be a more profitable business. In terms of profitability, income and employment generation, particularly of rural employment generation and high export potentiality, betel leaf production appears to be a promising agricultural product. It has enormous potentiality for expansion. The policy makers should, therefore, take the necessary measures, which would encourage development of betel leaf production. Several policy recommendations emerge from the results of the study which are highlighted below: i) Capital shortage was one of the several problems faced by the betel leaf growers. Without institutional credit support, it is difficult for the farmers to devote large area to the betel leaf production. It is, therefore, necessary that credit on easy terms and condition may be provided to the farmers for betel leaf production. Policy makes should pay an immediate attention to this matter. ii) Price stabilization and/or floor price schemes should be chalked out to ensure minimum level of profit for betel leaf production in the rainy season; when huge quantities of betel leaf are grown. iii) Modern technology and scientific knowledge of betel leaf production should be transferred to betel leaf growers by extension workers for improving the efficiency in production and thus, influence its per hectare yields. 188 Betel leaf production at farm level in some selected areas of Bangladesh

iv) Improved transportation facilities should be made available in betel leaf growing area to reduce marketing cost and for quicker supply of betel leaf to the organized markets. v) The policy makers should give proper attention to betel leaf production for its export potentiality. The policy makers should also pay attention to develop sound marketing facilities both for inputs and outputs

References

Ali, M.H. and Rahman, M.H., 1987. Economics of Betel Leaf Cultivation in a Selected Area of Bangladesh, ADAB News. pp. 18-24.

Bangladesh Bank. 2002. Annual Export Receipts 2000-2001. Statistics Department. Bangladesh Bank. Dhaka. BBS, 2000. Yearbook of Agricultural Statistics of Bangladesh. Ministry of Planning, Government of the Peoples Republic of Bangladesh. Export Promotion Bureau (EPB). Bangladesh Export Statistics, 1992-1999, pp.122-124, Motijheel C/A, Dhaka, Bangladesh. Mridha, M.R.H. 2002. Economics of Betel leaf production in an area of Rajshahi District. An unpublished thesis, submitted to the department of Agricultural Economics. Bangladesh Agricultural University. Mymensingh. Planning Commission. 1997. The Fifth Five Year Plan 1997-2002. Ministry of Planning. Government of the Peoples Republic of Bangladesh.