Farm size and profitability of rice farming under rising input costs

Abstract

As small farmers produce 90% of the total rice in the world, it is important to maintain adequate incentives for small rice farmers to ensure an adequate global rice supply. Rising input prices and agricultural wage rates, however, have been reducing overall profitability, consequently generating disincentives to rice farmers. Using household income and expenditure survey data for 2000 and 2010, this paper econometrically demonstrates that the loss in profitability is generally larger for small farms than for large farms, as small farms use more labor and other inputs than large farm households to earn higher rice income and profit. This paper econometrically demonstrates that, while per acre overall rice farming profitability (profit/total revenue) in Bangladesh declined more in 2010 than in 2000, the rate of reduction for small rice farm households is higher than for large farm households. It is found that, for both small and large farm households, the costs of wages, chemical fertilizer, irrigation, and tilling increased more significantly in 2010 than in 2000; however, the rate of increase for small farm households was higher than for large farm households. Consequently, the total cost of rice farming per acre for small farm households increased more sharply in 2010 than for large farm households. As a result, the profitability of rice farming per acre for small farm households declined more than for large farm households in 2010. Policies are drawn up based on the findings.