Cost, Benefit and Breakeven Analysis of Monsoon Potato Production in Southern Shan State, Myanmar

Cost, Benefit and Breakeven Analysis of Monsoon Potato Production in Southern Shan State, Myanmar

Published: 2021.09.24
Accepted: 2021.09.24
23
Demonstrator
Department of Agricultural Economics, Myanmar
Professor
Department of Agricultural Economics Yezin Agricultural University, Myanmar
Demonstrator
Department of Agricultural Economics, Myanmar
Assistant Lecturer
Department of Agricultural Economics, Yezin Agricultural University

ABSTRACT

Potato becomes one of the potential crops for global food security issue because of its high nutrient content and goodness of eating. In Myanmar, potato is widely grown in Southern Shan State. Therefore, this research aims to study the profitability of potato production in four townships in Taunggyi District, Southern Shan State. Simple random sampling was used to select 1,280 monsoon potato farmers from four townships by using structured questionnaire in 2021. The average cultivated area of monsoon potato in the study area was 0.78 hectare (ha) and the average yield was 17.12 MT/ha. The highest yield was found in Pinlaung Township while the lowest yield was found in Hsihseng Township. The average production variable cash cost was US$ 2,686/ha and the average gross benefit was US$ 3,406/ha. Consequently, the average net benefit was US$ 720/ha. Both the highest cost of production and the highest gross benefit per hectare of monsoon potato was found in Hopon Township whereas the lowest cost of production and the least gross benefit was found in Hsihseng Township. Kalaw Township where farmers had received the highest net benefit of monsoon potato per hectare, however, farmers in Hsihseng Township obtained the least of it. During the study period, the average market price of potato was US$ 199/MT. So, the average breakeven price of monsoon potato in the study area was US$ 157/MT and the average breakeven yield was 13.47MT/ha to cover the cost of production. Nevertheless, there were many factors to vary production cost and profitability of potato production which are soil fertility level, capital investment, usage of improved and high-yielding varieties, usage of different amount of inputs, climate conditions, pest and disease infestation, adoption of high yielding practices, accessibility of market information, communication, and market demand. To sum up, it is necessary for farmers to choose climate resilient varieties and market demanding varieties so that they could get higher income and economic profit by producing monsoon potato in Shan State. Continuously, it is still needed to do further studies in the potato sector that would lead to upgrade the socio-economic status of potato farmers in Shan State.

Keywords: Breakeven analysis, cost and benefit, Monsoon potato, Myanmar, Southern Shan State

INTRODUCTION

Potato production status in Myanmar

Myanmar is one of the agricultural-based countries in Asia, and its commercial crops are cereals, pulses, oil seed crops, vegetables, and fruits. Therefore, the agricultural production sector of Myanmar is one of the main contributors to the Gross Domestic Product (GDP) of the country. However, the agricultural sector’s contribution to the country's GDP has declined due to foreign direct investment in the oil and gas sector and the mining sector (Aung, 2018).

Fresh vegetables are an essential part of a healthy diet and potatoes are a nutritious crop which is widely grown and consumed not only in the world but also in Myanmar. As a result, farmers in various parts of Myanmar are growing more and more potatoes to meet the demand for the products. Nowadays, the potato is a popular vegetable and one of the main culinary crops in Myanmar’s households because most people eat potatoes as a dish or a snack. Subsequently, potatoes are also an important cash crop for farmers in Myanmar (Pronk et al., 2016).

According to the statistical data of the Department of Agriculture (DOA), in 2020-2021, the monsoon potato cultivation areas of Southern Shan State, Eastern Shan State, and Northern Shan State are 13,034 hectares (ha), 739 hectares, and 633 hectares respectively (Table 1) (DOA, 2020). There are two types of potato cultivation in Shan State, one is grown as a major crop with two seasons of production (rainy and winter season), and another is cultivated as a second crop grown after paddy rice (Aung, 2018).

Almost all farmers in Shan State grow at least two crops at each season to protect their investments. As a result, most potato farmers share their land with turmeric and potato. Furthermore, Shan State is also a major potato distributor for the rest of Myanmar. According to the above information, the largest potato-growing areas in Myanmar are the townships in the Southern Shan State, Taunggyi District. Among these townships in Taunggyi District, the main townships for growing monsoon potatoes are Kalaw Township, Pinlaung Township, Hopon Township, and Hsihseng Township.

Objectives of the Study

  1. To investigate the costs and net benefit of potato cultivation in Southern Shan State
  2. To find out breakeven price and breakeven yield of current monsoon potato cultivation in the study areas  

METHODOLOGY

Study areas selection for data collection

Kalaw, Naungtayar, Pinlaung, Pindaya, Pekon, Nyaungshwe, Ywangan, Hopon, and Hsihseng Townships are the most potato-growing areas in Southern Shan State (DOA, 2020). Therefore, among these townships, Kalaw, Pinlaung, Hopon, and Hsihseng Townships in Taunggyi District were selected as the study areas. In 2020-2021, the total number of farmers who are cultivating monsoon potatoes in Kalaw Township are 3,968 and the total areas under monsoon potatoes production are 3,791.17 hectares. In Pinlaung Township, the number of monsoon potato farmers and the potato cultivation areas are 5,738 and 2,395.79 hectares respectively. The total number of monsoon potato growers and the potato growing areas in Hopon Township are 210 and 159.35 hectares in turn. Moreover, the numbers of farmers who are planting monsoon potatoes in Hsihseng Township are 189 and the total areas of potatoes production are 136.52 hectares (DALMS, 2021).  

Sampling method

Field surveys were conducted by using simple random sampling methods based on statistics and by using survey questionnaires. According to the survey procedure conducted in Kalaw and Pinlaung Townships, a systematic random sampling method was used to select the sample farmers when the specified number of the complete list of the targeted population was obtained. But it was not necessary to determine the appropriate sample size in Hopon and Hsihseng Townships because the total numbers of monsoon potato farmers were fully surveyed.

Data collection and data analysis

To study the agricultural production costs and net profits of monsoon potatoes in Southern Shan State, a field survey for primary data collection was undertaken in May 2021. For the primary survey, the total sample size was 1,280 potato farmers. The survey was conducted using a face-to-face interview method for the sample farmers using survey questionnaires. In the interview, it makes sure that the enumerators did not influence the farmers’ answers to the questionnaire. The main data of the survey questionnaire were yield per hectare (ha), price per metric ton (MT), production costs per hectare, and net benefit per hectare of monsoon potatoes. Moreover, the data of the family labor force involved in the potato production and the value of the family labor force were also collected. The collected data were digitally aggregated, and the outputs were entered into a pre-defined format for evaluation. Moreover, the data were analyzed via Microsoft Excel to get the results. 

RESULTS AND DISCUSSION

Monsoon potato farmers in Southern Shan State

The number of sample farmers in Kalaw, Pinlaung, Hopon, and Hsihseng Townships is shown in (Table 2). The survey was done with 441 sample farmers in Kalaw Township, 440 sample farmers in Pinlaung Township, 210 sample farmers in Hopon Township, and 189 sample farmers in Hsihseng Township. The total sample farmers 1,280 were interviewed to collect the data of costs and net profits of monsoon potato production.  

Cultivated areas of monsoon potato (2020-2021)

The average cultivated areas of monsoon potato in Kalaw, Pinlaung, Hopon, and Hsihseng Townships were 0.78 hectares. In terms of the potato cultivated area under individual farmers in the four surveyed townships, the maximum cultivated area was 8.58 hectares, and the minimum cultivated area was 0.07 hectares. In addition, the difference between the cultivated area of each farmer in these townships and the average cultivated area was 0.6 hectares. According to the information in the study, farmers in Kalaw Township have the most monsoon potato cultivated area, while farmers in Pinlaung Township have the least cultivated area. In addition, Kalaw Township had the highest standard deviation value for the cultivated area of monsoon potato (Table 3).

Effective Yield of Monsoon Potato (2020-2021)

The average effective yield per hectare of monsoon potato in the four townships was 17.12 MT/ha. Then, the maximum effective yield per hectare of the potato in the study townships was 28.19 MT/ha, and the minimum effective yield was 8.56 MT/ha. Furthermore, the difference between the effective yield per hectare of monsoon potato of a sampled respondent and the average effective yield per hectare of the potato was 1.85 MT/ha. According to the information in the table, Pinlaung Township produced the highest effective yield per hectare of monsoon potato in the studied townships, while Hsihseng Township had the lowest effective yield per hectare of the potato. In addition, Kalaw Township had the highest standard deviation of the effective yield per hectare of monsoon potato. The amount of effective yield per hectare of potato in Kalaw, Pinlaung, Hopon, and Hsihseng Townships is described in Table 4.

Market price of monsoon potato (2020-2021)

The average market price of monsoon potato in the four townships in 2020-2021 was US$ 199/MT. The maximum market price of the potato for which farmers were receiving in the study townships was US$ 327/MT, and the minimum market price was US$ 123/MT. The difference between the individual market price and the average market price of monsoon potato was US$ 31/MT. Farmers in Hopon Township had received the highest market price, while farmers in Hsihseng Township had obtained the lowest market price for the potato they produced. However, potato market prices in Hopon Township are the most variable among farmers because of different factors before, during and after cultivation (Table 5).

Monsoon potato production variable cash cost (2020-2021)

The average production variable cash cost per hectare of monsoon potato in the study areas was US$ 2,686/ha. Then, the maximum cultivation cost per hectare of potato was US$ 4,245/ha and the minimum production cost was US$ 834/ha in the four surveyed townships. In addition, the difference between the cost of cultivation per hectare of monsoon potato of a respondent and the average production variable cash cost per hectare of the potato was US$ 586/ha (Table 6).

Among the surveyed townships, Hopon Township had the highest cost per hectare of monsoon potato production, while Hsihseng Township had the lowest cost of cultivation per hectare of the potato. Taking stock of the information received during the survey, low production cost of potato in Hsihseng Township was due to reduction in labor costs, lower land preparation costs, and low use of input (fuel and fertilizer). On the other hand, it was observed that land preparation cost and amount of input used are high in Hopon Township.    

Gross benefit of monsoon potato (2020-2021)

According to the study, the total average gross benefit of potato farmers in four townships in 2020-2021 was US$ 3,406/ha. Farmers in Hopon Township had received the highest average gross benefit and the amount was US$ 3,920/ha. In Kalaw and Pinlaung Townships, farmers were received US$ 3,314/ha and US$ 3,572/ha as the average gross benefit from their yields respectively. However, in Hsihseng Township, the amount was the lowest and only US$ 2,662/ha. The maximum average gross benefit of potato, US$ 5,436/ha, was found in Kalaw Township while the minimum one, US$ 1,845/ha, was found in Hsihseng Township. By studying with standard deviation (SD) value, the gross benefit of potato that individual farmers received was US$ 609/ha deviated from the average value of it (Table 7).

Net benefit of monsoon potato (20202-2021)

The net benefit of potato for farmers who live in Kalaw, Pinlaung, Hopon and Hsihseng Townships are found in Table 8. Net benefit measures difference between total gross benefit and total variable cash costs. The average net benefit of monsoon potato in the surveyed areas was US$ 720/ha. Kalaw Township obtained the highest average net benefit, US$ 900/ha while there was only US$ 545/ha in Hsihseng Township that the farmers received. Both maximum and minimum net benefit of potato was found in Kalaw Township due to different conditions of soil fertility and accessible water in their growing area and due to different level of inputs utilizations and cultivation practices. Based on standard deviation results, the net benefit of potato that individual farmers received was US$ 809/ha deviated from the average value of it.

Breakeven price of monsoon potato (2020-2021)

Table 9 describes the results of breakeven price of potato in the study townships. Breakeven price of a crop is the price that a farmer should receive for his product to cover the variable cash costs. The breakeven price of potato was calculated with the following formula.

In the survey area, the average breakeven price of potato in 2020-2021 was US$ 157/MT. At the same time, the average market price of potato in these areas was US$ 199/MT. Therefore, it can be concluded that the farmers who grow potato in that area benefited US$ 42 for each metric ton of potato.

However, breakeven price of potato can be varied in different townships as shown in (Figure 1). In Kalaw, it was US$ 145/MT whereas in Pinlaung, it was US$ 163/MT, in Hopon, it was US$ 193/MT and in Hsihseng, US$ 130/MT severally. This is because monsoon potato effective yields, production costs and sowing methods can also be varied from one location to another. The average standard deviation value of breakeven price of potato is US$ 30/MT in total.

According to the results, potato farmers in all surveyed townships received more market price than their individual breakeven price to cover the variable cash costs. It means that current market price of potato in this specific location could cover current variable cash cost of production. In addition, farmers in Kalaw Township obtained the highest return price (different between breakeven price and market price) which is US$ 54/MT higher than its breakeven price. Therefore, from an economic point of view, Kalaw Township was the most profitable area for potato production as compared with the remaining study townships although the standard deviation value of that township was US$ 30/MT between farmers.

Breakeven yield of monsoon potato (2020-2021)

The results of breakeven yield of potato in four study townships in 2020-2021 are shown in Table 10. Breakeven yield is the yield that the farmer should get at least to cover the production cost up. In this study, the breakeven yield of potato was calculated by using the following formula.

The average breakeven yield of potato in the study area was 13.47 MT/ha which means if the average market price of potato is US$ 199/MT, the farmers in that area must have produced 13.47 MT/ha of potato to cover its cost of production.

However, the average breakeven yield of potato differs from one township to others as shown in (Figure 2) because of various market prices and production costs. Average breakeven yield in Kalaw Township was 12.10 MT/ha while it was 14.96 MT/ha in Pinlaung Township. Similarly, average breakeven yield in Hopon Township was 13.72 MT/ha while it was 12.93 MT/ha in Hsihseng Township. The maximum and minimum amounts of average breakeven yield were varied that resulted in different standard deviation value. The average standard deviation value of breakeven yield analysis of monsoon potato was 2.02 MT/ha. Therefore, based on breakeven yield results in four townships, farmers in Pinlaung Township must get higher yield of potato to cover its production cost in comparison to other townships since they had the highest breakeven yield.

CONCLUSION AND RECOMMENDATION

This study was an attempt to describe the production cost and net benefit of farmers who cultivate monsoon potato as a cash crop in four townships, namely, Kalaw, Pinlaung, Hopon and Hsihseng Township, Taunggyi District, Southern Shan State during 2020-2021. The study was analyzed based on the average values. However, there may not be the same cost and benefit from one another because of variable market prices that individual farmers received resulting from the quality of the product, accessibility of market information and communication, storage facilities, unstable of market demand and so on. In addition, it can also be different due to the factors such as transportation costs and post-harvest waste from harvesting to selling period. Consequently, different market prices of potato in a metric ton could change the profitability of potato production at a significant amount. Moreover, the quality of potato and the market price would depend on other factors like selection of potato varieties and post-management practices and that could also affect directly on the market price. The most common challenges in agriculture such as climate change, instability of market demand and selection of varieties have a great impact on the profitability of individual potato farmer so that it is imperative for farmers to choose climate resilient crop varieties and improved varieties for high market demand and good market price.

Because of the geographic conditions in Shan State, potato becomes one of the most profitable cash crops for that region in Myanmar. Therefore, it is still needed to do several researches related to crop cultivation practices, crop production and its quality, market connection and market potential of potato, value chain and supply chain analysis aiming to the development of potato sector in Myanmar.

REFERENCES

Aung, M, 2018, Root and tuber crops: Untapped potential for food and nutrition security and rural livelihood development in Myanmar, Results of a scoping study: Food Resilience through Root and Tuber Crops in Upland and Coastal Communities of the Asia-Pacific (FoodSTART+), International Potato Center, 78 p. (https://hdl.handle.net/10568/92894)

Castle, Emery and Manning H. Becker, 1962, Farm Business Management: The Decision-Making Process, Oregon State Universtiy

DALMS (Department of Agricultural Land Management and Statistics), 2021, Official Report, Ministry of Agriculture and Irrigation, Nay Pyi Taw, Myanmar.

DOA (Department of Agriculture), 2020, Official Report, Ministry of Agriculture, Livestock and Irrigation, Nay Pyi taw, Myanmar.

Pronk, A.A., F. ter Beke, K. Minderhoud, M. Goosen, M. Phoo, N. Nang, 2016, Baseline potato cultivation in Myanmar, Wageningen, the foundation Stichting Dienst Landbouwkundig Onderzoek, Research Institute Praktijkonderzoek Plant & Omgeving / Plant Research International, Wageningen UR (University & Research Centre), PRI report 647.

Thiam, Tan Bock and Shao-Er Org, 1979, Reading in Asian Farm Management: Singapore University Press.

Comment