Economic Impact of Technology Adoption in Rice Farming: The case of “One Must Do, Five Reductions” in Vietnam

Economic Impact of Technology Adoption in Rice Farming: The case of “One Must Do, Five Reductions” in Vietnam

Published: 2023.10.16
Accepted: 2023.10.13
42
Center for Agrarian Systems Research and Development (CASRAD)
Department of Agricultural and Resource Economics, Kangwon National University
Faculty of Economics and Rural Development, Vietnam National University of Agriculture

ABSTRACT

Technology adoption helps farmers gain more benefits in comparison to conventional practices. “One Must Do, Five Reductions” has been introduced in the Vietnamese Mekong Delta for nearly a decade and recent concerns arise including farmers’ low income and socio-economic barriers to adopt. Using survey data from 455 smallholder rice farmers in Hau Giang province across two rice crop seasons, the study confirmed the economic advantage of the adoption of “One Must Do, Five Reductions” through the lower costs of production inputs while maintenance of the revenues, leading to significantly higher cost – benefit ratio (CBR). The adopter reduced 25-32.5% seeds, 10.6-16.4% nitrogen, 1.67-1.84 times to spray pesticides and successfully applied AWD on rice farms, and then achieved an extra net benefit from VND3-5 million (US$128-213)/ha. Findings of the study suggests that the “One Must Do, Five Reductions” are effective practices in rice economics in the Vietnamese Mekong Delta and its agriculture should continue to support and disseminate this technical package through extension programs.

Keywords: One Must Do Five Reductions, 1M5R, economic impact, technology adoption, Mekong Delta

INTRODUCTION

Rice is a staple grain that feeds the most population of the world. The rice production worldwide has reached 787.3 million ton and a harvested area of 165.3 million ha, of which the Asian region is the largest rice producer, accounting for 89.9% of the total volume and 86.6% of the harvested area (FAO, 2023). In Vietnam, the Mekong Delta (MKD) accounts for 53.9% of the harvested area, 55.5% of the total production (GSO, 2021), and contributes about 90% of rice export (Dao, Tinh and Vang, 2020). Vietnam has made great efforts in farm system reforms, hybrid rice adoption and irrigation investment (Xie and Napasintuwong, 2014), and recently supported a transition to sustainable rice production known as “One Must Do, Five Reductions” program in the eight MKD provinces with the involvement of 104,448 smallholder rice farmers and the adopted rice area of 113,870 ha (Flor et al., 2021). In 2012, the Ministry of Agriculture and Rural Development of Vietnam recognized 1M5R as an advanced technical package by the Decision No. 532-QD-TT-CLT. This is a policy realized by extension program to advise farmer voluntary to apply.
“One Must Do, Five Reductions,” hereafter 1M5R, helps the MKD to improve the sustainability of rice production by reducing inputs such as fertilizers and pesticides and then reducing environmentally negative impacts (Stuart, Devkota, et al., 2018). From an economic perspective, 1M5R helps smallholder farmers increase their profits in comparison to the conventional rice farming (Stuart, Devkota, et al., 2018; Flor et al., 2021; Tho, Dung and Umetsu, 2021). The increase in rice-farming profitability has relied on increased rice yield through the intensive use of production inputs such as seeds, fertilizers, pesticides, and labor. However, overuse of production inputs has reduced profits and caused serious consequences for health, the environment, and agricultural sustainability. Some challenges in reducing fertilizers, water management, and seed rate as well as low income in rice farming reported recently in some MKD provinces alerts the need for the maintenance of 1M5R in the region (Connor et al., 2021; Tran et al., 2021). Therefore, the objective of this study is to revisit the economic impact of 1M5R with the hypothesis that 1M5R adoption helps farmers gain more benefits compared to conventional farming.

METHODOLOGY

1M5R definition

1M5R has been developed through longitudinal support from the International Rice Research Institute (IRRI) and requires simultaneous activities in rice farming. “One Must Do” requests the farmers use improved inbred varieties with quality of seeds certificated by the authorized organizations. “Five Reductions” requests farmers to reduce production inputs at certain levels and manage their farmlands following the Alternate Wetting and Drying technique (AWD) as well as use combine harvesters. In our study, a farmer is defined as an adopter if he or she meets all criteria. If at least one criterion is not met, the farmer is defined as a non-adopter (VnSAT, 2016). The criteria for 1M5R assessment are presented in Table 1.

Data collection and processing

A total of 455 farmers participated in the survey. The selected area represents the soil conditions in Hau Giang province (Table 2). The study used a structured questionnaire asking about the demographics and rice farming in the Winter - Spring rice crop in 2020-21 (W-S) and the Summer - Autumn rice crop in 2021 (S-A). The missing data was fulfilled by the responsible interviewees, who are the district and communal extension staff belonging to The Department of Agriculture and Rural Development of Hau Giang province and previously had been trained for data collection.
The information has been transformed into the Excel sheet, and some calculation steps were needed to convert input information, for example compound fertilizers and single-element fertilizers need to be transformed into pure nitrogen, phosphate, and potassium. Next, the data processing, including calculation, testing, and plotting, was performed by Stata.

Economic analysis

The economic variables encompass the quantities and the costs of the production inputs including seeds, fertilizers, pesticides, irrigation, labor and harvest, and the outcomes including the productivity and the revenues. Net benefit (π) is calculated as total revenue (TR) minus total costs (TC). The benefit – cost ratio (BCR) is the ratio between the total revenue (TR) and the total costs (TC). Equations (1) and (2) illustrate their calculation, respectively.

All the economic indicators are calculated in thousand Vietnamese Dong at the exchange rate reference of US$1 = VND23,500. For testing the two mean values, the study uses the t-test with the default alpha at 5%. 

RESULTS AND DISCUSSION

Rice production in Hau Giang province

Hau Giang province is located at the center of the MKD and administratively formed of 1 city, 2 towns, and 5 districts. The natural land covers 162,2000 ha, of which agricultural land is approximately 134,000 ha and ranked 9th among MKD provinces (GSO, 2019). The rice farming system covers 2 rice crop seasons, some areas produce 3 rice crops or rice-fish rotation. In recent years, the total annual rice area of Hau Giang fluctuates around 190,000 ha, with the average production and productivity at 1,250,000 ton and 6.4 ton/ha, respectively (Figure 1).

Profiles of the participants

In our study, more than two-thirds of the farmers (68-69%) successfully adopted the 1M5R, a more impressive figure than a prior estimate of 40% in an MKD province (Lan Phuong et al., 2016). Most household farmers participated in agriculture cooperatives (78%) and the adopters dominated over the non-adopters in proportion. Two-thirds of interviewees (65%) were male farmers because men often manage agriculture farms as well as the targets of extension programs (Gallina and Farnworth, 2016; Lovell, 2017). The average age of the participants was 51-year-old, and the adopters were 3-years younger than the non-adopters. This result is consistent with many other findings that young farmers are more likely to adopt new technologies (Chandio and Jiang, 2018; Brown, Daigneault and Dawson, 2019; Pandey and Kumar, 2019). For education attainment, the participants had attended an average of 6.5 years at school in the 12-year schooling system in Vietnam. Well-educated farmers tend to actively adopt agricultural technologies (Khanal, 2016; Dung, 2020) but there is not much difference between the adopters and the non-adopters in our survey. Most participants (91%) are Kinh, the majority ethnic group in Vietnam, and the rest are Khmer.

Descriptive statistics of rice farming

The adopters cultivated on an average of 0.90-0.94 ha rice farmlands while the non-adopter farmed on an area of 0.79-0.85 ha. These farm sizes were impressive figures in comparison to half of the MKD farmers cultivating on less than 0.5 ha (Luu, 2020). No difference is reported in the rice area between the adopters and non-adopters in W-S but 0.15 ha higher for the adopters in S-A.
As regards the production inputs including seeds, fertilizers and pesticides, the non-adopters invested a more significant amount than the adopters in the two-crop seasons. The non-adopters used extra 30-39 kg ha-1 seeds than the adopters, equivalent to 25-32.5% of the seed standard. Regarding fertilizers, the problem of excessive usage is reported to negatively impact on pests, diseases, and underground water. In our study, the non-adopters used extra 10.61-13.08 kg/ha nitrogen than the adopters. In other words, the non-adopters overused 10.6-16.4% nitrogen in W-S and S-A, respectively. Similarly, the non-adopters used an extra 5.23-11.57 kg/ha phosphate and 6.34-7.65 kg/ha potassium compared to the adopters. Although the 1M5R criteria do not include phosphate and potassium thresholds but the increase in nitrogen will lead to an increase in the use of phosphate and potassium on rice farms. As a result, overuse of all fertilizers and more diseases occur in the rice farms. Indeed, during the crop seasons the non-adopters sprayed pesticides on rice farms more than the adopters 1.67-1.84 times. This might lead to intensive labor and chemicals utilized that we would examine in the next section.
As regards the rice productivity, in general the adopters yielded 7.84 ton/ha in W-S and 5.65 ton/ha in S-A meanwhile the non-adopters achieved 7.63 ton/ha and 5.58 ton/ha, respectively. The farmers in the research area achieved a higher yield in comparison to the average rice productivity in MKD, which generated only 6.83 ton/ha in W-S and 5.56 ton/ha in S-A (GSO, 2021). Our study found that in W-S the adopters yielded 0.21 ton/ha, equivalent to 2.8%, higher than the non-adopters while using a lower input. This result shares the common with some corresponding research (Stuart, Devkota, et al., 2018; Stuart, Pame, et al., 2018; Tho, Dung and Umetsu, 2021) and reaffirms the overuse of production inputs in the MKD. In S-A, the non-adopters were reported to yield 0.2 ton/ha, equivalent to 3.5%, higher than the adopters. The S-A in the MKD region is well known for the influences of harsher natural conditions such as high temperature and heavy rainfall, so production inputs might play a decisive role in rice yield.

Economic analysis of rice farming

Table 5 indicates the cost-benefit analysis and BCR indicator in details between the two farmer groups. Total cost covers all the component costs incurred during the rice farming. In our study, family labor cost was calculated according to the average labor cost in the local area. Total revenue equals the revenue from rice plus the revenue from byproducts. The currency unit is a thousand Vietnamese Dong.
As regards the costs, our study shows that the non-adopters paid significantly more than the adopters for all the input costs, except for family labor in W-S and tillage and family labor in S-A. In general, the adopters had to pay approximately VND13 million (US$553) in W-S and VND13.3 million (US$566) in S-A while the non-adopters had to pay approximately VND15 million (US$638) and VND16 million (US$681) in the corresponding crop seasons. The total costs the non-adopters had to pay more than the adopters varied from VND2.0-2.8 million (US$85-119) per crop, equivalent to 15.2% and 20.9% of the total production costs, respectively. Figure 3 shows the illustration for the input costs, notably the difference in seeds, fertilizers, and pesticides. The extra costs can be explained that the non-adopters used more production inputs than the adopters. An interesting point in the input costs is that the adopters paid significantly higher costs for tillage and family labor than the non-adopters. It can be explained that the adopters paid more for tillage because they might make their rice fields flatter in order to easily apply AWD, a mandatory standard in 1M5R practice. The adopters paid more for family labor partly because they had to spend more working days to visit the rice farms. This requirement is quite like the application of IPM on rice farming.
As regards the revenues, in general the adopters achieved approximately VND43.7 million (US$1,860) in W-S and VND30.1 million (US$1,281) in S-A meanwhile the non-adopter achieved VND40.6 million (US$1,728) and VND29.9 million (US$1,272) in the respective crop seasons. Our study found there is no significant difference in total revenue between the adopters and the non-adopters. The reason came from the contribution of the rice revenue and other revenue to the total revenue. In W-S the adopters obtained significantly VND3.1 million (US$132) higher in rice revenue but significant lower in other revenue in comparison to the non-adopters. In contrast, the adopters in S-A obtained the same rice revenue but significantly VND0.24 million (US$10) higher in other revenue compared to the non-adopters. This leads to the total revenues of the two farmer groups equaling. It is worth noting that, on average the total revenue in W-S varied from VND40.6-43.7 million (US$1,728-1,860), approximately 1.4 - 1.5 times than the total revenue in S-A, which varied from VND29.9-30.1 million (US$1,272-1,281). In other word, W-S is a rice crop season with higher profitable potential than S-A due to its higher total revenue (Figure 2).
As regards the net benefit, the adopter achieved the net benefits of approximately VND30.7 million (US$1,306) in S-W and VND16.9 million (US$719) in S-A meanwhile the non-adopters achieved approximately VND25.6 million (US$1,089) and VND13.8 million (US$587), respectively. Our study found the adopters achieved significantly more net benefit than the non-adopters approximately VND5 million (US$213) in W-S and VND3 million (US$128) in S-A. Compared to the non-adopters, the higher net benefit of the adopters came from their lower total cost under the circumstances that the total revenues were indifferent. This result is consistent with the case study in Thailand where farmers obtain higher profits by using fewer inputs (Stuart, Pame, et al., 2018). 
As regards the BCR indicator, our study found a significant difference in BCR between the adopters and non-adopters in both two crops. In W-S, the BCR of the adopters was 3.45, relatively higher than that of the non-adopters at 2.81. Similarly, in S-A the BCR of the adopters was significantly higher than the non-adopters’ BCR by 0.39. The BCR indicator explains economic efficiency in rice farming. The high BCR indicator reflects the superiority of the total revenue against the total cost. Our BCR indicators confirm rice farming in W-S is more profitable than in S-A.

CONCLUSION

Rice farming plays a vital role in the Vietnamese MKD, contributing to food security and export. Technology adoption in common brings higher yields but does not automatically generate maximum benefits. Some findings have identified 1M5R as a profitable model and 1M5R meets the requirement to shift MKD agriculture from intensive-input production to rice economics. Recent reported challenges in reducing inputs and farming practices prevent the Vietnamese agriculture from disseminating 1M5R across the MKD provinces. We used the survey data collected in Hau Giang province to examine the economic perspective of 1M5R adoption at the smallholder farmer scale. The result confirms that the adopters were more significantly profitable than the non-adopters due to lowering the costs of the important inputs such as seeds, fertilizers, and pesticides, and 1M5R should be also considered a practice to reduce the unnecessary chemical use. 1M5R adoption helped the farmers reduce 25.0-32.5% seeds, 10.6-16.4% nitrogen, 1.67-1.84 times to spray pesticides and successfully applied AWD on rice farms, leading an extra net benefit from VND3-5 million (US$128-213)/ha, and therefore increased the BCR indicators to 3.45 and 2.33 in W-S and S-A, respectively. When 1M5R applied, the reduction of rice production inputs such as fertilizers and pesticides also contribute to environmental protection in the case that MKD currently has approximately 1.5 million ha of rice cultivation. Our study suggests that the Vietnamese government should continue to support and disseminate this technical package across the MKD province.
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ACKNOWLEDGEMENT

The authors would like to express their gratitude to the Department of Agriculture and Rural Development of Hau Giang province for the acceptance to access the data and their help during the research.

AUTHORS’ CONTRIBUTION

Nguyen Tien Da contributed to the design, analysis, and implementation. Hio-Jung Shin contributed to the design. Vu Thi My Hue contributed to the design. All the authors jointly participated in the manuscript writing.

COMPETING INTERESTS

All the authors declare that there is no competing interest

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