Economic analysis of production, marketing and prices of arecanut in Kasargod district of Kerala

Abstract

Arecanut is an important plantation crop grown in India, mainly by the small and marginal farmers. India is one among the leading producers of arecanut with an area of 4.55 lakh hectares and a production of 7.25 lakh tonnes in 2016-17. The study entitled “Economic analysis of production, marketing and prices of arecanut in Kasaragod district of Kerala” was conducted with the objectives of analysing the time series properties and formation of prices, estimating the economics and efficiency of arecanut production, identifying the marketing channels and the price spread in different channels and finding out the major constraints in production and marketing of arecanut in Kasaragod district of Kerala. The study was based on both primary and secondary data. The study was conducted in Kasaragod district, which has the largest area under arecanut cultivation in Kerala. Primary data was collected from 100 farmers, randomly selected from two blocks in the district. The data was also collected from 20 market intermediaries including wholesalers, retailers and Central Arecanut Marketing and Processing Co-operative Society (CAMPCO). Trend analysis revealed that area, production and productivity of arecanut in India exhibited increasing trend during the period from 1980-81 to 2015-16. Time series data on area, production and productivity of arecanut in Kerala over the years from 1980-81 to 2015-16 showed an increasing trend with regular ups and downs. Export and import of arecanut have also shown an increasing trend, both in quantity and value terms. The price behavior of ripe and dry arecanut in major markets of Kerala viz., Nedumangad, Telicherry, Kanhangad and Kozhikode were analyzed by decomposing the monthly prices into four components viz., trend, seasonal, cyclical and irregular variations, assuming a multiplicative model of time series. The prices of arecanut showed increasing trend in these markets. While analysing the seasonal variation, it was noticed that arecanut prices showed considerable seasonality. The increasing phase for ripe arecanut prices was observed from March to May, while for dry arecanut, the highest price was observed during April, May and November in Nedumangad, Calicut and Kanhangad markets respectively. Co-integration analysis of arecanut prices in the above markets revealed that the markets were cointegrated. Since arecanut is a perennial crop, its yielding phase was assumed to be 50 years, with a non-bearing phase of five years. The costs and returns were estimated by accounting the establishment and maintenance costs separately. The establishment cost was found to be ₹3,43,386 per hectare and the annual maintenance costs were ₹ 2,13,075, ₹ 2,06,925 and ₹1,58,608 per hectare in yield increasing, yield stabilising and yield declining phases respectively. The cost of cultivation per hectare of the crop was estimated as ₹ 2.67 lakh, while the net return was ₹ 1.30 lakh. It was found that human labour contributed 75 per cent of the total cost of cultivation. The average cost of production in the yielding phase was estimated as ₹ 150 per kg. To evaluate the resource use efficiency in arecanut cultivation, Cobb-Douglas production function was fitted. Plant protection chemicals and human labour were found to be significantly contributing towards the yield. The elastic coefficient for women labour charges was -0.13 indicating that the increase in expenditure on labour by one percent from the mean level. Moreover, a decreasing returns to scale in arecanut production was observed in the study area. The most common marketing channel identified in the study area was channel I (Producer- village trader- wholesaler- retailer- consumers). Even though marketing efficiency was highest in channel III (Producer- CAMPCO- retailers - consumers), farmers preferred channel I over channel III because of the immediate payment. Marketing costs were found to be ₹ 33.9, ₹ 29.44 and ₹ 28.44 per kg in channel I, II and channel III respectively. The highest price spread of ₹ 58.9 per kg was estimated in channel I, while it was lowest (44.94 per kg) in Channel III. Various constraints in production and marketing of arecanut were identified and ranked using Garret’s ranking technique. Among the various constraints faced by farmers in production, scarcity of skilled labour for harvesting and spraying, water scarcity, occurrence of pests and diseases were the major ones. Price fluctuation was the foremost constraint faced in marketing of arecanut. In order to tackle these constraints, mechanization of operations, value addition through product diversification, promoting the use of warehousing facilities and warehouse receipts as negotiable instruments for getting credit and strengthening market intelligence were recommended for ensuring better and stable prices for farmers.