By Chatura Rodrigo
Research Economist, IPS
In order to understand this situation further, the Institute
of Policy Studies of Sri Lanka (IPS) initiated a research project covering more than 600
paddy farmers in the Galle, Matara, Kandy, Matale, Gampaha and Colombo
districts. The research was funded by the South Asian Network for Development
and Environment Economics (SANDEE). The research adopts a mixed method
approach and aims to provide policy insights to better understand the
opportunity costs associated with paddy farming in Sri Lanka. This article is
based on some initial findings of the farmer survey and will be a starting
point of further analysis.
Are the Findings
Compatible with Popular Beliefs?
There were 310 organic farmers in the survey sample and the
maximum yield for organic paddy farming was recorded at 2730 kg/acre. Inorganic
farmer sample also consisted of 310 farmers and the maximum yield from
inorganic farming was recorded at 2625 kg/acre. The average yield from organic
farming was 1393.7 kg/acre and the average yield from inorganic farming was
1313.7 kg/acre. On statistical grounds, it was proven that there is no
statistical significance between the two yield components. Therefore, on
average both organic and inorganic farmers were producing the same level of
yield. The findings were against the popular belief where inorganic farming was
expected to have higher average yields.
However, further information suggests that a majority of
organic farmers are cultivating varieties that are proven to be high yielding.
In addition, they have adopted cultivation methods claimed to be associated
with astronomy and auspicious times. Whether these practices are significantly
affecting the yield or not is yet to be proven. It is also a subject beyond the
scope of this research. However, it is clear that organic farmers are using
varieties that are high yielding and their farming practices are complementing
the high yields. The average seed paddy requirement in organic farming
(41.4kg/acre) is lower than inorganic farming (44kg/acre). Focus Group
Discussions (FGDs) proved this information where farmers confirmed the seed
paddy requirement is low for organic paddy farming. However, in statistical
terms, there is no significant difference in seed paddy requirement in organic
and inorganic farming.
As the article suggested at the start, difference could be in
the cost components of the two cultivation methods. However, all cost
components might not have a statistical significant difference. One major cost
component is the cost of seed paddy. Results from the survey suggest that the
average cost for seed paddy in organic farming is 4420 LKR/acre and in
inorganic it is 4346 LKR/acre. During FGDs organic farmers also pointed out that
they are accounting a higher cost for seed paddy compared to inorganic farming.
However, cost of seed paddy did not differ significantly among organic and
inorganic farmers.
In the standard classification of organic paddy farming and
inorganic paddy farming, the organic paddy farmers are not expected to use any form
of chemical fertilizer such as MOP, TSP and UREA. However, inorganic farmers
can use organic fertilizer and still call themselves inorganic farmers. The study
suggests that some organic farmers (close to 20% of the sample) use chemical
fertilizers as well. However, the amount they use is less than the amount used
by inorganic farmers. These differences are statistically different as well. The
comparison below is based on the sample of inorganic farmers and
self-proclaimed organic farmers who use chemical fertilizers. Average MOP usage
in organic farming (22.4 kg/acre) is
lower than the usage in inorganic farming (36.8 kg/acre). Also the average TSP usage in
organic farming (21.1 kg/acre) is lower than the usage in inorganic farming (27.6
kg/acre). Furthermore, Average UREA usage in organic farming (58.17 kg/acre) is
lower than the usage in inorganic farming (98.45 kg/acre).
Animal manure, leafy manure and bone manure are the main
organic fertilizer types that are in use. The percentage of inorganic farmers
that use the above mentioned organic fertilizer types are less that 5%.
Therefore, it does not make sense to compare. However, organic farmers use 120.2
kg/acre of animal manure, 28 kg/acre of leafy manure and 35 kg/acre of bone
manure. Furthermore, on average 539.6 kg/acre of bio-pesticides are being used
by the organic farmers in their cultivations.
Another major cost component is the cost of labour. Labour is
two-fold, family labour and hired labour. In terms of family labour, average
values are 13935.5 LKR/acre and 17789.7 LKR/acre for organic farming and
inorganic farming, respectively. This suggests that the inorganic farming tend
to employ much family labour. This difference in terms of family labour is
statistically significant as well. In
terms of hired labour, the average values are 11936 LKR /acre and 14585 LKR/acre
for organic farming and inorganic farming, respectively. This analysis shows
that there’s a clear statistical different in cost of labour between organic
and inorganic farming -- organic farming employ less family as well as hired labour
compared to inorganic farming.
Results from the FGDs support this finding as they confirmed
that most of the “shared labour methods” are still in effect among organic
farmers, which reduces labour costs. In
terms of the cost of machinery, an organic farmer on average spends around 22300
LKR/acre and an inorganic farmer on average spends around 13,852 LKR/ acre.
These results were further justified during the FGDs where organic farmers
mentioned that conventional machinery are not easy to use with organic paddy
farming mainly due to the morphology of the plants (height and the width of the
plant bunch). Results show that organic farmers are getting a higher farm gate
price compared to inorganic farmers. The average output price from organic
farming is 47.98 LKR/kg while inorganic farming it is 38.72 LKR/kg. These
prices are statistically different from each other. This suggests that organic farmers are better
off in terms of output price.
Current Status
It is important to understand the full structure of the
profits to determine which farming method is profitable than the other. The
estimation of the input demand functions will allow in estimating the
opportunity cost of supply associated with organic farming compared to
inorganic farming. This is the next step of this study.
However, this preliminary analysis provides some valuable
insights. First of all, it is important to remember that the data collection
was done in year 2015 where the fertilizer subsidy was in full effect. The
chemical fertilizers were subsidized 90% which is a considerable cost saving component
for inorganic farmers. In addition to paying for organic fertilizer or
employing labour in preparation, the FGDs suggest that organic farmers had to
incur many transaction costs such as transportation, in securing required
organic fertilizer. Secondly, most organic farmers were not commercial oriented
compared to inorganic farmers, meaning that they sold less of what they
produce. Therefore, even though they were offered a higher price at the market
place, finding a market was not an easy task. FGDs confirmed that the opportunity
cost of finding a market place for organic farmers is higher compared to
inorganic farmers. This increases the unintended transaction costs such as
storage and transportation. Thirdly, cost of machinery for organic farmers is
quite high compared to inorganic farmers. For example, as suggested by the
FGDs, some organic paddy lands are muddy. Therefore, the average time a tractor
spends on ploughing the land is higher thus increasing the cost of land
preparation. These insights justify the
starting point of this article, that it is not about the yield, but it is about
the costs that the farmers are concerned when making the decision.
The writer, Chatura Rodrigo is a Research Economist at the Institute of Policy Studies of Sri Lanka
(IPS).
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