Bangladesh J. Seed Sci. & Tech.

16 (1&2): 133-140 (2012)

ISSN 1029 - 8800
PROFITABILITY AND RESOURCE USE EFFICIENCY OF MAIZE
PRODUCTION IN SELECTED AREAS OF LALMONIRHAT DISTRICT
J. Paul, I. A. Begum2, M. R. Hossain, A. K. M. G. Kausar1, and M. M. Rahhan
Former MS students, Dept. of Agricultural Economics, Bangladesh Agricultural University,
Mymensingh, Bangladesh

Abstract
The aim of the study was to examine the profitability, resource use efficiency, compare contract and
non-contract maize producing farmers in selected areas of Lalmonirhat district. The study was
conducted in 5 selected villages namely Kashiram, Bairati, Shrutidhor under Tushvandar union and
Cholbela, Shialkhoa under Chondropur union under Kaligonj Upazila of Lalmonirhat district during
February, 2012. Stratified random sampling technique was used to select total 60 sample farmers as
30 small, 20 medium and 10 large farmers and survey method was followed to collect primary data.
Cobb-Douglas production function was employed to find out influences of factors of production in
gross return of maize production. To test the efficiency, the ratio of marginal value product (MVP)
to the marginal factor cost (MFC) for each input is computed and tested for its equality. The major
finding of the study was the large farmers gained net return Tk. 52828 ha-1 which is higher than the
small (Tk. 43436 ha-1) and medium (Tk. 40112 ha-1) farmers. Undiscounted BCR was found 2.04,
1.70 and 1.88 for small, medium and large farmers, respectively. In maize cultivation, seed cost,
human labour cost, fertilizer cost, power tiller, irrigation cost had strong effects on its production and
farmers had scope to increase income through efficient uses of resources. The study also reveals that
the contract farming system is more profitable compared to non-contract farming system.
Key words: Maize production, Profitability, Contract and non-contract farming.

INTRODUCTION
Maize is the third most important crop after rice and wheat, among the cereals grown in Bangladesh.
It was introduced as relatively new crop in the cropping patterns of Bangladesh especially in the
northern region (Hasan et al., 2008). Bangladesh has a huge potentiality for increasing maize
production. It has 14.09 million hectares of cultivated land of which nearly 2.8 million hectares are
suitable for maize cultivation but it covers only 0.17 million hectares (BBS, 2011). Local demand for
maize stands at an estimated 12 million tons annually, and this demand is mostly from the poultry
and fish sector. Local production is only 1.02 million tons (BBS, 2011) and the rest are imported. It
is grown both in winter and summer seasons in Bangladesh. Maize is more nutritious than rice in
terms of protein, phosphorus, fat content and also in trace elements like magnesium, potassium and
sulphur. It is playing an important role in the agrarian economy of Bangladesh. Top half of the plant
is used as cattle feed and bottom half with fibrous root is used as fuel. In addition corn oil, starch and
many other products can be produced from maize. It is noted that the farmers of Bangladesh are
largely using the high yielding varieties which mostly cover their production costs and also help to
earn a handsome profit.

1
Former MS student, Dept. of Agribusiness and Marketing, Bangladesh Agricultural University,
Mymensingh, Bangladesh.
2
Associate Professor, Dept. of Agricultural Economics, Bangladesh Agricultural University, Mymensingh,
Bangladesh
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Profitability and resource use efficiency of maize
With the introduction of high yielding seeds, its area and production have been expanding fast. As
farmers are getting higher yield, lower risk and higher profit from maize than rice and wheat, they
are gradually diverting their efforts in maize cultivation. Therefore, maize cultivation is being rapidly
expanding both in Rabi and Kharif season.

Contract farming is a case for bringing the market to the farmers, which is navigated by agribusiness
farms. In Bangladesh the notion of contract farming is very recent. Contracting system in Bangladesh
developed after the creation of Crop Diversification Board (CDB). Maize farmers are now involving
in contract farming system with different companies because of gradually increase of feed industries.
Contract farming involves four things; pre-agreed price, quantity or acreage (min. /max.), quality and
time. There are two types of contract in contract farming system as marketing contract and production
contract. The relevance and importance of each contract type varies from product to product and
these are not mutually exclusive (Key and Runsten, 1999). But, there is a systematic link between
product market and factor markets under the contract arrangements as contracts requires a definite
quality of produce. Thus the present study was undertaken to determine the profitability of maize
production of independent farmers and compare it with contract farmers, identify the major factors
affecting the gross returns of maize production.

MATERIALS AND METHODS

The study was conducted in five villages namely Kashiram, Bairati and Shrutidhor under Tushvandar
union, Cholbela and Shialkhoa under Chondropur union under Kaligonj Upazila of Lalmonirhat
district. Sixty maize farms (30 small, 20 medium and 10 large) were selected from 320 listed farmers
by using stratified sampling technique and survey method was followed to collect primary data in
February, 2012. Cobb-Douglas production function was used to estimate the production function of
maize producing farmers.

The specification of the Cobb-Douglas production function was as follows:

Yi = a X1b1 X2b2X3b3X4b4 X5 b5 X 6 b6 X7 b7 e ui
In the linear form it can be written as follows:
ln Y = ln a+ b1 lnX1 +b2 lnX2 +b3 lnX3 +b4 lnX4 + b5 lnX5 +b6 lnX6 +b7 lnX7+Ui ;

Where,
ln = Natural logarithm;
Y= Gross return (Tk. /ha);
X1= Seed cost (Tk. /ha);
X2= Human labour cost (Tk. /ha);
X3= Power tiller cost (Tk. /ha);
X4= Irrigation cost (Tk. / ha);
X5= Organic fertilizer cost (Tk. /ha);
X6= Inorganic fertilizer cost (Tk. /ha);
X7= Insecticide cost (Tk. /ha);
a= Constant or intercept term;
b1, b2, b3,…,b7, = Production coefficient of the respective input variable to be estimated; and Ui
= Error term.
In order to test the efficiency, the ratio of marginal value product (MVP) to the marginal factor cost
(MFC) for each input is computed and tested for its equality to 1, i.e;

MVP
=1
MFC
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The marginal productivity of a particular resource represents the additional to gross returns in value term
caused by an additional one unit of that resource, while other inputs are held constant. When the marginal
physical product (MPP) is multiplied by the product price per unit, the MVP is obtained. The most
reliable, perhaps the most useful estimate of MVP is obtained by taking resources (X i) as well as gross
return (Y) at their geometric means. Since all the variables of the regression model were measured in
monetary value, the slope co-efficient of those explanatory variables in the function represented the
MVPs, which are calculated by multiplying the production co-efficient of given resources with the ratio
of geometric mean (GM) of gross return to the GM of the given resources, i.e.;

In Y = In a + bi In Xi
dY Y Y(GM)
= bi Therefore, MVP (Xi) = bi
dXi Xi Xi(GM)

Where,
Y = Mean value of GM of gross return in Tk.
Xi = Mean value of GM of the ith variable input in Tk.

MFC is the price of per unit of input. If the MFCs of all the inputs expressed in terms of an additional,
Tk, in calculating the ratio of MVP to MFC, the denominator will always be one, and therefore, the ratio
will be equal to their respective MVP.

And to compare the profitability of contract and non-contract farmers a total 24 farmers were taken into
account. Because in the study area, among selected 60 maize farmers, 12 (8 small and 4 large) farmers
were found who were engaged themselves into contractual system. Thereby another 12 (8 small and 4
large) farmers were taken randomly from selected farmers to compare profitability.

RESULTS AND DISCUSSION

Socioeconomic condition of the sample farmers is very important in the case of research conducting
because there are numerous interrelated and constituent attributes that characterizes an individual and
profoundly influences development of one’s behavior and personality. It was found that sample farmers
were mostly engaged in agriculture sector. Average land holdings of the sample small, medium and large
farmers were 0.59 ha, 1.62 ha and 4.80 ha, respectively. All categories of farmers deployed their 48% to
59% cultivable land in maize production.

Table 1. Occupational status of the sample farmers

Type of occupation Small farmer Medium farmer Large farmer All farmer
Agriculture 23 (38.33) 14 (23.33) 8 (13.33) 45 (75.00)
Small business 7 (11.66) 3 (5.00) 1 (1.66) 11 (18.33)
Service - 3 (5.00) 1 (1.66) 4 (6.67)
Total 30 (50.00) 20 (33.33) 10 (16.66) 60 (100.00)
Source: Field Survey, 2012.
Table 2. Land distribution of the sample farmers
Category No. of Average land holdings Average Maize Per. of Maize
farmers Own Rented in/ Rented out/ Total cultivated cultivated cultivated
Leased in Leased out land land land
Small
30 0.49 0.10 0.00 0.59 0.59 0.33 55.93
(0.02-1.0 ha)
Medium
20 1.68 0.09 0.15 1.62 1.62 0.78 48.5
(1.01-2.0 ha)
Large
10 4.92 0.09 0.21 4.80 4.80 2.40 58.75
(2.0- above)
Source: Field Survey, 2012.
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Profitability and resource use efficiency of maize
In determining the profitability of maize production cost and return of all categories of farmers have
been shown in Table 3 and Table 4. Details cost items indicate that human labor and material inputs
were used in different cultural operations and management practice in maize production. The
estimated per hectare cost of production of maize was Tk. 41663, 57167, 60024 for small, medium
and large farmer, respectively. It was found that per hectare yield of maize for small, medium and
large farmer were 4225 kg, 4864 kg and 5642.65kg, respectively. Highest net return obtained by
large farmers (Tk. 52828) compare to small (Tk. 43436) and medium (Tk. 40112) farmers. The result
of input output cost ratios (BCR) have been used to compare financial efficiency. It was found that
small farmers was financially efficient than medium and large farmers in maize production.

Table 3. Per hectare cost of maize production for all categories of farmers
Particular Small farmer Medium farmer Large farmer All farmers
Total Per. of Total Per. of Total Per. of Total Per. of
cost total cost cost total cost cost total cost cost total cost
A. Variable cost
Labour 13600 32.64 26200 45.83 27600 45.98 22467 42.00
Power tiller 2870 6.89 3121 5.46 3326 5.54 3105 6.00
Seed 4630 11.11 5090 8.90 5455 9.09 5058 9.53
Manure 1830 4.39 1897 3.32 1977 3.29 1902 3.59
Fertilizer 5930 14.23 6463 11.31 6510 10.85 6301 11.88
Insecticide 460 1.10 558 0.98 573 0.95 531 1.00
Irrigation 3200 7.68 3800 6.65 3800 6.33 3600 6.79
Total variable cost 32520 78.05 47129 82.44 49241 82.04 42963 80.99
B. Fixed cost
Interest on 658 1.58 725 1.27 920 1.53 768 1.45
operating capital
@ 8% (3 months)
Land use cost 7635 18.33 8213 14.37 8753 14.58 8200 15.46
Privilege cost 850 2.04 1100 1.92 1400 2.33 1117 2.11
Total fixed cost 9143 21.95 10038 17.56 11073 18.44 10085 19.01
Total cost (A+B) 41663 57167 60024 53048
Source: Field Survey, 2012.

Table 4. Per hectare yield and return of maize production for all categories of farmers
Return Small farmer Medium farmer Large farmer All farmers
Output (kg) 4255 4864 5642.65 4920.55
Gross return (Tk.) 85100 97280 112853 98411
Gross margin (Tk.) 52580 50151 63612 55448
Net return (Tk.) 43436 40112 52828 45459
BCR (undiscounted) 2.04 1.70 1.88 1.85
Source: Field Survey, 2012.

To identify and measure the effects of the factors of production on gross returns of maize production
Cobb-Douglas production function was used.
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Paul et al.

Table 5. Estimated values of regression coefficient and related statistics for all farmers
Variables Small farmer Medium farmer Large farmer
Intercept 5.311* (0.346) 11.980** (2.522) 8.981** (1.971)
Seed cost (X1) -0.179 (0.116) -0.222 (0.061) -0.109 (0.043)
Human labour cost (X2) 0.282* (0.130) 0.279* (0.115) 0.299* (0.117)
Power tiller cost (X3) 0.197* (0.097) 0.057* (0.023) 0.412* (0.172)
Irrigation cost (X4) 0.188** (0.074) 0.230** (0.056) 0.200** (0.001)
Organic fertilizer cost (X5) 0.137** (0.036) 0.334** (0.090) 0.165 (0.516)
Inorganic fertilizer cost (X6) 0.676** (0.023) 0.417* (0.180) 0.193** (0.043)
Insecticide cost (X7) 0.184* (0.085) 0.0357 (0.627) 0.072** (0.011)
Adjusted R2 0.866 0.902 0.805
F-value 49.220** 22.533** 18.644**
Returns to scale 1.895 1.445 1.494
Source: Field Survey, 2012.
Note: Figures within the parenthesis indicate standard errors, *=Significant at 10% probability level,
** =Significant at 5% probability level.

Data presented in Table 5 reveal that human labor cost, power tiller cost, irrigation had positive and
significant impacts on the increase of maize production. The coefficient of seed cost was found
negative, which implies 1 percent increase in seed cost total will decrease gross return by 0.18, 0.22
and 0.11 percent for small, medium and large farmers, respectively. The coefficient of organic
fertilizer cost was positive and significant for small and medium farmers whereas inorganic fertilizer
cost has positive and significant impact for all categories of farmers. The coefficient of insecticide
was found positive and significant for small and large farmers. The estimated value of the adjusted
R2 of the model was found 0.87, 0.90 and 0.80 for small, medium and large farmers, respectively.
These values indicated that 0.87, 0.90 and 0.80 percent of the total variation in gross return has been
explained by the variables included in the model. The model is well fitted to data (F= 49.220**,
F=22.533**, F=18.644**) for small, medium and large farmer, respectively. It may be noted that
specification of the model and inclusion of the various explanatory variables in the model is correct.
The returns to scale are the sum of all coefficients except intercept term which were 1.90, 1.45 and
1.50 for small, medium and large farmers, respectively.

Resource use efficiency

From Table 6 it is evident that for all categories of farmers the ratio of MVP and MFC is positive
and more than one for power tiller, manure, irrigation and insecticide, which implied that more profit
could be obtained by increasing the use of these resources. This indicated that these inputs were being
allocated efficiently and maize crop farmers could enhance their higher income through more
intensive use of these inputs on their farm. The ratio for human labor was less than one but positive,
which indicated that farmers should limit the use of this resource. It is quite noticeable that the ratio
of MVP and MFC for seed was negative for all categories of farmers indicating that maize crop
producers would be losing by applying additional dose of this input in the production process.
For estimating resource use efficiency, calculated MVPs for small, medium and large farmers have
been shown in Table 6.
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Table 6. MVPs of inputs in production function
Inputs Geometric mean Coefficient Ratio of MVPxi and MFCxi
Small farmers
Seed 3112.32 - 0.23 - 8.57
Human labor 12659.34 0.12 1.14
Power tiller 2536.22 0.18 8.10
Irrigation 4258.99 0.78 20.57
Manure 1236.67 0.18 16.70
Fertilizer 5241.69 0.08 1.83
Insecticide 527.29 0.15 32.59
Medium farmers
Seed 5027.98 -0.23 -5.18
Human labor 11215.36 0.24 2.46
Power tiller 3965.48 0.23 6.70
Irrigation 4236.09 0.26 6.88
Manure 1992.28 0.19 10.90
Fertilizer 6436.69 0.16 2.84
Insecticide 684.36 0.16 26.89
Large farmers
Seed 3156.65 -0.10 -3.66
Human labor 18336.85 0.25 1.57
Power tiller 3201.36 0.20 7.04
Irrigation 4269.49 0.18 4.93
Manure 2781.95 0.17 7.10
Fertilizer 6025.69 0.13 2.55
Insecticide 729.64 0.16 25.10
Source: Field Survey, 2012.

Comparison between contract and non-contract farmers

The basis of contract framing system in the study area was mainly marketing of maize. The existing
contract system between farmers and the company (CP, EuroFeed, BRAC, etc.) called “buy back”
arrangement. In this agreement responsibility of land, inputs and equipment, harvesting and
processing, storage belongs to farmers. The contractors offered technical advice to the farmers,
monitor and supervise the maize production. The maize cobs were taken by the company at the
predetermined prices which is higher than the market price. Therefore, farmers get assurance of
selling maize. However, still now the companies in the study area choose only medium and large
farmers in contract farming system. The companies avoid small farmers because small farmers have
tiny capacity to produce maize and have no access for proper storage facility. Per hectare profitability
of contract and non-contract maize farming system has been presented in Table7.
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Table 7. Per hectare cost and return of Maize production of contract and non-contract
farmers
Particulars Contract farmer Non-contract farmer
Cost
A. Variable cost
Labour 24556 20028
Power tiller 3062 2652
Seed 5126 5002
Cowdung 2002 1929
Fertilizer 6322 6118
Insecticide 596 530
Irrigation 3600 3600
Total variable cost 45264 39859
B. Fixed cost
Interest on operating 905 797
capital @ 8% (3 months)
Land use cost 7930 7654
Privilege cost 1025 967
Total fixed cost 9860 9418
Total cost (A+B) 55124 49277
Return
Yield (kg) 5527 4786
Gross return 110540 98411
Gross margin 65276 55447
Net return 55416 45459
BCR (undiscounted) 2.00 1.86
Source: Field Survey, 2012.
From Table 7 it is clear that per hectare total cost for contract farmers (Tk. 55124) was higher than
non-contract farmers (Tk. 49277). The average output of maize for contract and non-contract farmers
was 5527 kg and 4786 kg, respectively. The net return was Tk. 55416 and 45459 for contract and
non-contract farmers, respectively. The BCR was found 2.00 for contract farmers that mean the gross
return is doubled over the total cost. On the other hand, the BCR was 1.86 for the non-contract
farmers, which is also noticeable.
CONCLUSION
From the above discussion, it may be concluded that maize production is profitable, average net return of
the maize production was Tk. 45459 ha-1. It was found that all categories of farmers are using additional
dose of seed, which reducing economic efficiency and there is huge potential to increase maize production
with the introduction of efficient resource management. Net return of the contract farmers was much
higher (about Tk. 100000) compare to non-contract farmers. This finding has conformity with the finding
of Ferdousi (2011).
Policy recommendations
On the basis of the findings of the present study, the following specific recommendation may be
made for improving maize production:
a) As maize is a profitable enterprise, so the government and other research institutions should
develop based cropping pattern, provide adequate extension and training program to expand
maize production that farmers can realize easily its importance.
b) As contract farming is profitable the farmers should be encourage to follow and the government
should take necessary steps to stabilize input price for optimum use.
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Profitability and resource use efficiency of maize

REFERENCES
BBS 2011. Statistical Yearbook of Bangladesh, Bangladesh Bureau of Statistics, Statistic Division,
Ministry of Planning, Government of the People’s Republic of Bangladesh, Dhaka.
Chowdhury, M.K. and Islam, M.A. 1993. Production and Uses of Maize, Research Report, On-Farm
Research Division, Bangladesh Agricultural Research Institute, Joydebpur, Gazipur.
Ferdousi S., 2011. An economic study on maize production in some selected areas of Bogra district.
An unpublished M.S. thesis, Dept. of Ag, Economics, Bangladesh Agricultural University,
Mymensingh.
Key and Runsten, D., 1999. Contract farming of agro-processing firms and the scale of out grower
production. World Development, 27(2): 381- 401.
Paul. J., 2012. An economic study on maize production in some selected areas of Lalmonirhat district.
An unpublished M.S. thesis, Dept. of Ag, Economics, Bangladesh Agricultural University,
Mymensingh.