Thesis Abstract of AGS Students

Profitability and price response of rice production system in the Mekong delta, Vietnam

Nguyen Huu Dung (1994)

Under the market privatization of inputs and output in Vietnam in recent years, and the situa- tion of land and other scarce resources being heavily devoted to rice production with little con- sideration on economic returns, there is a need to investigate the prospects for profitability increase and efficiency of rice production, and responses of the small and large farmers to prices of inputs and rice. Data used in the study are collected from 180 farmers producing Winter-Spring rice in the dry season 1992, in 22 villages of 4 provinces in the Mekong Dalta, the largest rice production area of the country.

The enterprise budget analysis shows that all returns to labor are greater than returns to material inputs. On the average, one VN dong invested on labor and material inputs provides a return of 4.84 and 3.80 VN dong, respectively. No significant difference is found in returns to labor between groups of farms. The return to material inputs in the large farms (³ 9 acres) is higher than that in the small farms. Rates of return (return/cost ratio) vary across locations due to variations in input utilization levels, yields, and prices. On the other hand, there is no significant difference in rates of return between the small and large farms. This implies that profitability per acre of rice production on the small and large farms are similar.

Seemingly Unrelated Regression Estimator (SURE) is employed to estimate the normalized restricted translog profit and input share functions simultaneously. The results reveal that farmers cultiva-ting rice on the small farms and large farms have equal relative economic efficiency, and maximize their profits. The relationship between labor, fertilizer, and pesticide are complementary in rice production for all farms, except between the labor and fertilizer in the small farms are sub- stitution inputs. Output supply elasticities with respect to rice prices are 0.97 and 0.73 for small and large farms, respectively. The ownprice elasticities of demand for labor are slightly elastic (-1.45 and -1.1) while those for fertilizer and pesticide are inelastic ranging from -0.72 to -0.96. Finally, expansion in education level and land quantity increase rice supply and demands for variable inputs.

On the agricultural policy aspect, the cost effectiveness analysis reveals that price policies n inputs and output have slightly greater impact on the small farms than on the large farms. Any policy to raise the rice price has the larger effect on farmers' benefit than the policies reducing inputs prices do. However, implimentation of price policies should take into account the government budget, and economic and environmental acceptance.

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