Environmental constraints and profitability relationships in agriculture: a case study of wheat farming in Bangladesh

Abstract

This article attempts to measure the influence of environmental constraints on profitability and resource use in agriculture by utilizing survey data of 293 wheat farmers from three regions of Bangladesh. Analysis is based on a profit function, where the selected variables representing environmental constraints were incorporated as additional fixed factors. Results revealed that environmental constraints have a significant influence on both profitability and farmers’ resource allocation decisions. Output supply and input demands were significantly affected by land suitability and other environmental constraints (i.e. a combination of poor soil fertility, pest and weed infestation and weather variation). The policy implications include development of wheat varieties that are suitable for low lying and/or marginal areas, are resistant to insect and pest attacks and can withstand weather variations. Also, soil fertility improvement through soil conservation and crop rotation, improvement in managerial practices through extension services and strengthening of research–extension link will improve profitability.

Keywords:

• environmental constraints
• land suitability
• wheat farming
• profit-function analysis
• Bangladesh

JEL classifications:

• Q12
• O13
• C31

Notes

^aExchange rate of USD 1.00 = Tk 63.76 in 2004–2005 (BB 2010).

^bFigures are based on farmer's own account of his/her crop loss due to each specific constraints. The constraints include yield losses due to insect and pest attack, weed infestation, weather variations (drought or storm) and poor soil fertility status.

^aExchange rate of USD 1.00 = Tk 63.76 in 2004–2005 (Bangladesh Bank [BB] 2010).

1. Although there are 64 districts in Bangladesh, most of the secondary data are still reported at the level of these 21 former greater districts.

2. The low-intensity area is excluded because it is assumed that wheat production has limited potential in these districts.

3. In this study, the term district and region are used interchangeably to emphasize the large spatial variation between our study areas.

4. There are a total of 29 agro-ecological zones which cut across many of the 21 greater districts/ regions.

5. The SURE procedure, proposed by Zellner (1962), is a generalization of a linear regression model containing several equations. The SURE estimation procedure is efficient particularly when the error terms of the individual equations are assumed to be correlated as compared with separate estimation of each equation of the system. Since the input share equations in our model are derived from the profit function, it is logical to assume that the error terms of the profit function and all the share equations are correlated, and therefore, the choice of the SURE procedure is more appropriate.

6. Although 24 modern varieties of wheat have been released since 1974, ‘Kanchan’, released in 1983, remains the most popular choice. In fact, 94% of our sample farmers used only ‘Kanchan’.