From experimental data to farmer recommendation:  an economic analysis of on-farm trial of UMMB feed for milking animals in rain-fed Pothwar, Pakistan

H Shah*, M Sharif*, A Majid**, U Hayat*** and A Munawar****

* National Agricultural Research Centre, Islamabad, Pakistan
** ICARDA, Country Office, Islamabad, Pakistan
*** Livestock Production Research Institute, Khairimurat, Pakistan
**** The Bank of Nova Scotia, Canada
hassnainshah1@gmail.com

Abstract

An economic evaluation of feeding urea mineral molasses blocks (UMMB) to milking cows and buffaloes was carried out based on on-farm experimental data emanating from on-farm trials conducted at two sites in the rainfed Pothwar of Pakistan.

The on-farm trail data indicated that the milk yield increased significantly after one week and the yield difference sustained with the use of UMMB. The assessment study also depicted improvement in health of the animals. The partial budget analysis indicated that net benefits were higher for both buffaloes and cows. Marginal Rate of Return (MRR) was 158% for cows and 132% for buffaloes with the use of UMMB. This performance is also not affected by small possible fluctuation in input and output prices as shown by the sensitivity analysis with changing input and output prices. Hence farmers stand to gain better when they use UMMB for the milking animals. Finally it is attempted through the use of empirical data to demonstrate how changing prices affect recommendations, which can be made on the basis of the results of such experiments. This relationship between changing prices of inputs and outputs suggests the price at which UMMB can be recommended in rainfed Pothwar.

Key words: farmer recommendations, marginal analysis, sensitivity analysis

Introduction

Agriculture continues to be the single largest sector of Pakistan and within the agriculture sector livestock is now a major sector as it accounts for 52.2 percent of agriculture value added– much more than the combined contribution of major and minor crops (45.3%), 11 percent of GDP and affects the lives of 30-35 million people in rural areas. Average household holdings are 2-3 cattle/buffalo, 3-4 sheep/goats and 10-12 poultry per family which contribute 35 to 40 percent of their income (Government of Pakistan 2008).

Rainfed (barani) areas make an important contribution to agriculture in Pakistan. About one fourth of total cultivated land is rainfed (Khan et al 1993). Barani Pothwar in Punjab Province contributes about 20 percent of cropped area and 90 percent is rainfed. Due to the low and unreliable rainfall of the region, yields of main crops are low and farm income mostly remains insufficient to maintain the family (Shah et al 2003). Most of the labor force in the rainfed areas is engaged in livestock rearing, particularly women contribute significantly in animal rearing. Livestock also serves as a security against crop failure (particularly in rainfed agriculture of Pakistan) and in emergencies (Afzal, 2003) as a means of saving and a supplementary source of income (Khan et al 1993, Shah et al 2003). In Punjab (Pakistan), about 70 percent of livestock is held on barani lands (Khan et al 1993). However these areas face fodder shortage to meet livestock demand resulting in increased pressure on natural rangelands causing desertification. There is a great seasonal variability in feeding resources in barani area. There are few seasons having a basket of lush green fodder against few lean periods with negligible fodder supply. Fodder requirements influence farmers’ land use decisions. In post-harvest periods, during monsoon, and in lean fodder periods, grazing is more frequent. In winter, animals are additionally fed with oilseed cake and wheat flour. Generally, buffaloes and lactating animals are fed larger amounts of supplementary feed (Khan et al 1993).

Keeping in view the fodder availability and the requirement for supplemental feed for milch animals in the rainfed Pothwar area, experiments on the use of Urea Mineral Molasses Blocks as a balance supplemental feed were conducted in a participatory manner. Based on the experimental results, assessment from farmers’ point of view and economic analysis of the data, UMMB were recommended for dissemination on large scale. 

The economic analysis of on-farm trials could be very useful to farming systems or commodity-oriented research teams. It would also be helpful to understand how should it be done, what type of data are required and how should they be collected? The information gained from economic analysis is only useful if it is adopted, i.e., incorporated into the design of further experimental work or the formulation of farmer recommendations. This can only be achieved if the objectives, concepts and methods of economic analysis are understood and accepted both by researchers and policy makers. 

Materials and methods 

The use of economic analysis to develop farm management recommendations, especially relating to livestock stocking rates and farm input levels, has been contentious for farm management economists, agronomists and extension officers. In particular, invoking the profit-maximization assumption has been of concern (Farquharson 2006). Agricultural economists have developed areas of theory and methods of analysis, which have addressed the risk issue, utility analysis (Dillon 1971), risk analysis (Anderson et al 1977, Hardaker et al 2004). The question discussed here is whether there is another way of developing farm input recommendations that provides valuable information to decision makers in an investment context.

An approach to developing recommendations for farmers has been to draw on standard production economic theory (Doll and Orazem 1984), consider the likely return to funds invested in new technology and ask the question: ‘what is the likely minimum return on investment (ROI) or marginal rate of return (MRR) that would be necessary for a technology to be appealing to farmers given that there is variability in likely returns and that they are risk averse? This approach was considered particularly useful for farmers in developing countries (CIMMYT 1988).

Data sources

For the economic evaluation of UMMB trials the data from the research trials conducted at two integrated research sites of Barani Village development Project (BVDP) on cows and buffalo was provided by the concerned scientists from Barani Livestock Production Research Institute (BLPRI), Kharimurat, Punjab involved in the applied research. Assessment based on the farmers’ perception regarding the acceptability and compatibility of the intervention was first done by the team of social scientists from Social Sciences Institute, National Agricultural Research Center, Islamabad, Pakistan and also collected information on prices of inputs and output (milk) from the same area.

The research trials were conducted systematically,  using scientific approach right from site selection, diagnostic analysis, baseline survey and on-going assessment of trails at farmers’ fields. Therefore the basic assumption of conducting diagnostic studies in order to identify the major constraints, on farm productivity and understand farmers’ agronomic and socio-economic conditions (Boughton et al 1990) were fulfilled. Second, the procedures assume that the level of net benefit is an important criterion for farmers when they evaluate alternative technologies. As an extensive exercise was done for selection of representative sites so that the research findings could be extrapolated on a vast representative area therefore the assumption of homogeneous sites to conduct economic analysis on pooled data is also valid. However the number of replications and sites are limited due to project limitation.

The experiment was conducted with ten milking cows at one site at Hafizabad village, Tehsil Jand, Pakistan. The trail was conducted in summer season  (15 May to last 29 July). In this season summer grasses, sorghum and millet along with wheat straw are fed to the animals. Cotton seed cakes are used as concentrate for milking animals.  One block of 5 kg was fed to each experimental animal per week with a daily dose of about 0.71 kg per animal. Milk yield was recorded for 10 weeks while one reading was taken one day before the start of experiment. No change in the feeding pattern was made except for the UMMB. Although eight control animals were also selected but there was no change in the overall milk yield of control animals, therefore the milk yield of the experimental animals prior to the use of UMMB was used as control (without UMMB) for further analysis. Market price 5 kg UMMB was Rs. 36 while an additional Rs. 2 was added as the transportation cost to calculate field price. The price of cow milk was Rs. 12 per Liter at the time of trial (2002). As the trials were conducted on farmers’ fields in participatory manner therefore the milk yield of experimental cows was adjusted 5% downward only due to some advisory role of the scientists. There was no additional cost involved. The farmers also reported the additional benefits like the improvement in animal health with the use of UMMB during the assessment surveys.

Similarly the trial on the impact of UMMB on milk productivity for buffalo was conducted at two sites Hafizabad and Jarmot both in winter season (from last week of November to first week of February). It was conducted with 9 buffalos at Hafizabad and 11 at Jarmot. Oat, brassica wheat (fodder) along with winter weeds mainly from wheat (grain) crop are used as green fodder. One block of 5 kg was given for one animal per six days with daily dose of 0.833 kg per animal. Milk yield was recorded after one week in the morning for 10 weeks while one reading was taken one day before the start of experiment. No change in the feeding pattern was made except for the UMMB. There was no change in the milk yield of control buffalos therefore the milk yield of the experimental animals prior to the use of UMMB was used as control (without UMMB) for further analysis.

As the representative sites were selected by comprehensive site selection criteria, with similar conditions, same type of animals, feeding pattern etc therefore the data from both sites was pooled. This also increased the number of observations.   

Analytical techniques

Partial budget analysis

Partial budget is a way of calculating total cost that varies and the net benefits of each treatment in an on farm experiment. It includes average yield, adjusted yield and gross field benefits.  The adjusted yield for a treatment is the average yield adjusted downward to a certain percentage to reflect the difference between the experimental yield and the yield farmers could expect from the same treatment without the involvement of researchers. To calculate the net benefits average adjusted yield (Yadj) of each treatment was adjusted 5% lower side. Field price (Pf), defined as the value of one kilogram of the output (milk) to the farmer, were calculated. The adjusted average yield was used for calculating gross field benefits (GBf).

GB_f =P_f x Y_adj  

To calculate the net benefits (NB) total cost that varies (TCV) was calculated using field prices of inputs. TCV is the sum of individual costs that vary among different treatments where as the field price of a variable input is the value which must be given up to bring an extra unit of input into the field.  The net benefits were calculated as:

NB = GB_f - TCV

Marginal analysis

The purpose of marginal analysis is to reveal just how the net benefits from an investment increase as the amount of investment increases. So an easier way of expressing this relationship is by calculating the marginal rate of return (MRR), which is the marginal net benefit (MNB) divided by the marginal cost (MC) expressed as percentage. As the dominated treatments are not included in the marginal analysis so the MRR will always be positive. The MRR indicates what farmers can expect to gain on the average in return from their investment when they decide to change from one practice to another.

In order to make recommendations from marginal analysis it is necessary to estimate the minimum acceptable rate of return (M) to farmers in the recommendation domain. Empirical evidences have shown that for majority of situations M will be between 50 to to100 percent. For most of the cases when there is introduction of any new practice/input 100% is recommended and is also used for analysis in this study. 

Regarding investments of a capital nature, CIMMYT (1988) proposed that a minimum ROI of twice the cost of capital could be a relevant measure for investments of capital in new technologies. Alternatively, especially for poor farmers in developing countries or for technologies requiring substantial change to a farming system, a minimum target ROI of 100 % (the 2-for-1 rule) was likely to be more relevant. Farquharson (2006) has also supported this criterion.

Sensitivity analysis

Sensitivity analysis for different interventions was done to test a recommendation for its ability to withstand price changes. Sensitivity analysis simply implies redoing marginal analysis with the alternative prices. Through sensitivity analysis maximum acceptable field price of an input are calculated with the minimum rate of return with following equation.

Results and discussion 

Urea mineral molasses blocks for increasing milk productivity of cow

Partial budget analysis

The average milk yield without using UMMB was recorded at 3.05 liters per day while with the use of UMMB it came out to be 4.44 liters per day. Accordingly the gross benefits were nearly rupees 36.58 and 50.60 per day. There was no cost that varies in case of control (with out), the same gross field benefits were considered as net benefits, while in other case net benefits were Rs. 45.17 per day.  Partial budget is presented in Table 1.

Although the net benefits with the use of UMMB are much higher than without yet to make the results more clear and provide logic for recommendations marginal analysis was conducted. Through this analysis Marginal Rate of Return (MRR) is calculated which indicates what farmers can expect to gain on the average in return from their investment when they decide to change from one practice to another. The change in cost that varies was Rs. 5.43 per day while the change in net benefits was Rs. 8.59 per day resulting in 158 % marginal rate of return. So for each rupee invested in UMMB for cow the farmer would recover the Rs. 1.0 and an additional Rs. 1.58 at the given prices. Therefore, on the basis of MRR the technology is highly recommended for increasing milk productivity of cows, as the returns were much higher than minimum acceptable rate of return (100 %) for any technology to be recommended.  As the data set generated in these experiments is small, therefore it is recommended that more number of trials with sufficient replications over different locations would be worthwhile before the technology is recommended for wider dissemination. The results of Marginal Analysis are given in Table 2.

Maximum acceptable price of UMMB for cow was keeping the minimum acceptable rate of return at 100%. It is clear from the results that UMMB would be feasible even if the price increases up to Rs. 46.28/block with the milk price remaining constant at rupee 12 per liter. Maximum acceptable field price was calculated by using following formula.

Recommendations with changing prices

As the input (UMMB) and output (milk) prices have changed/increased considerably overtime therefore the marginal analysis to calculate MRR and sensitivity analysis for maximum acceptable field prices of the input (UMMB) are done with the increased prices. The technology is recommendable at all the prices where MRR is above 100% and the last column shows the maximum limit of the UMMB price that gives 100% MRR. The analysis is presented in Table 3.

Urea mineral molasses blocks for increasing milk productivity of buffaloes

Partial budget analysis

Market price of 5 kg UMMB was Rs. 36 while an additional Rs. 2 was added as the transportation cost to calculate field price. The price of buffalo milk was Rs. 16 per Liter. The milk yield was adjusted 5% downward. There was no additional cost involved. The average milk yield with out using UMMB was recorded at 6.96 liters per day while with the use of UMMB it came out to be 8.3 liters per day. Accordingly the gross benefits were rupees 111and 126 per day. The price of buffalo milk was 16 Rs. /Liter at the time of experiment. There was no cost that varies in case of control (without), the same gross field benefits were considered as net benefits, while in other case net benefits were Rs. 119.75 per day after deducting cost that vary (Rs. 6.33/day).  Partial budget is presented in Table 4. 

Marginal analysis

Through this analysis Marginal Rate of Return (MRR) is calculated which indicates what farmers can expect to gain on the average in return from their investment when they decide to change from one practice to another. The change in cost that varies was Rs. 6.33 per day while the change in net benefits was Rs. 8.35 per day resulting in 131 % marginal rate of return. So for each rupee invested in UMMB for buffalo the farmer would recover the Rs. 1.0 and an additional Rs. 1.31. Therefore, on the basis of MRR the technology is highly recommended for increasing milk productivity of buffalo, as the returns were much higher than minimum acceptable rate of return (100 %) for any technology to be recommended.  The results of Marginal Analysis are given in Table 5.

Sensitivity analysis

Maximum acceptable price of UMMB for buffalo was calculated keeping in view the price changes. It is clear from the results that UMMB would be feasible (100% MRR) even if the price increases up to 41.70 Rs. /block. Maximum acceptable field price were calculated by using following formula.

Recommendations with changing prices

To make recommendation keeping in view the overtime increasing prices trends both the marginal and sensitivity analysis was performed with different prices of milk and UMMB as presented in Table 6. The technology is recommendable at all the prices where MRR is above 100% and the maximum acceptable prices given in last column shows the maximum limit of the UMMB price that gives 100% MRR.

The response of the UMMB on milk productivity of cows was little higher than the buffaloes. The main reason was that the cows in the area were rarely given concentrate or commercial feed while buffaloes were already given some concentrates in the form of cotton seed cakes etc as supplemental feed. Due to these reasons the marginal change in milk productivity in cows was higher than buffaloes.

Conclusions and implications 

• The economic analysis based on the on-farm experimental data depicts a positive effect of UMMB supplementation on milk production of both cows and buffaloes. 

  
  

• The results of the assessment studies based on the participating farmers also indicate positive impact of UMMB on animal health. 

  
  

• Although the recommendation may change with increase in input prices yet the analysis with changing prices indicates that the technology is viable unless there is drastic increase in prices of UMMB. 

  
  

• So under the normal inflation trends the technology is cost effective and has the potential for increasing milk supply especially where the farmers do not practice supplementary feeding of concentrates.

  
  

• However for such analysis and recommendations there is needed to conduct the experiments for more number of years and at more locations with sufficient number of replications.

  
  

• The economic analysis of experimental data is a useful tool for making economically viable recommendations and farmer recommendations may change as prices change that can be determined through sensitivity analysis.

References 

Anderson J R, Dillon J L and Hardaker J B 1977 Agricultural Decision Analysis, Iowa State University Press, Ames.

Afzal M 2003 Livestock: It’s Role in Poverty Alleviation. Farming Outlook January-March, 2003. pp: 6-8.

Boughton D, Crawford E, Krause M and de Frahan B H 1990. Economic Analysis of On-Farm Trials: A Review of Approaches and Implications for Research Program Design. Staff Paper No. 90-78 Department of Agricultural Economics Michigan State University.

CIMMYT 1988 From Agronomic Data to Farmer Recommendations: An Economics Training Manual. Completely Revised Edition. Mexico D.F. http://www.cimmyt.org/english/docs/manual/agronomic/manual/part_one.pdf

Dillon J L 1971 An Expository Review of Bernoullian Decision Theory in Agriculture. Review of Marketing and Agricultural Economics 39(1), 3-80.

Doll J and Orazem F 1984 Production Economics: Theory with Applications, 2^nd Edition, John Wiley and Sons.

Farquharson R J 2006 Production Response and Input Demand in Decision Making: Nitrogen Fertilizer and Wheat Growers. Australasian Agribusiness Review - Vol.14 – 2006 Paper #5

Government of Pakistan 2008  Economic Survey of Pakistan 2007-08.  Government of Pakistan, Ministry of Finance, Islamabad, Pakistan

Hardaker J B, Huirne R B M, Anderson J R and Lien G 2004 Coping with Risk in Agriculture, Second Edition, CABI Publishing, Walling ford, U.K.

Khan M A, Ahmed M, Inayat K M and Zulfiqar A 1993 Livestock Management and Productivity Issues in three Main Rainfed Ecologies of Pakistan: Results from Exploratory Surveys, 1985-1990.

Shah H, Khan M A, Shah N A and Majid A 2003 Baseline Survey of Integrated Research Sites of Barani Village Development Project. Socioeconomic Research Studies 2002-03, SSI, NARC (PARC), Islamabad 107-138

Received 4 November 2008; Accepted 16 February 2009; Published 5 August 2009

Go to top