ACREAGE RESPONSE OF SUGARCANE TO PRICE AND NON PRICE FACTORS IN KHYBER PAKHTUNKHWA

Muhammad Saddiq, Muhammad Fayaz, Zahid Hussain, Muhammad Shahab and Irfan Ullah

International Journal of Food and Agricultural Economics (IJFAEC), 2013, vol. 02, issue 3, 8

Abstract: This study analyzed 42 years’ time series data from 1970-2011 for the acreage response of sugarcane to price and non-price factors in Khyber Pakhtunkhwa. Data was tested for major expected problems of time series i.e. Autocorrelation and Stationarity. For autocorrelation Durban h statistics was used and the value (0.539) indicates no serial Autocorrelation in the data set. While Augmented Dickey Fuller test was used for detection of Stationarity and the data was stationary at lag one. The study follows Nerlovian Partial Adjustment linear and non-linear models for acreage response. While Vector Auto Regression technique was used to estimate the effect of price and non-price factors on acreage allocation decisions of the farmers for sugarcane in the study area. The empirical results show that short run and long run elastisities are inelastic for all the variables and statistically significant at 5% significance level except average rainfall. Further, the influence of price, yield, and lag area are positive and significant in affecting acreage allocation decision. This means that if price, yield and lag area are enhanced, the acreage allocation of sugarcane might improve in-elastically. The relatively low values of coefficients obtained from the regression analysis indicates that sugarcane producers in making acreage allocation influenced more by their ideas of expected price than by previous year price. Similarly the magnitude of the linear and log coefficient of yield (0.676) and (0.208) suggesting that if rising trend in sugarcane yield persists it will help farmers’ expansion of sugarcane cultivation in future. Further, the relatively high value of the coefficients of lagged area (0.300) and (0.298) of sugarcane suggests that their area allocation adjust quickly for changes in expected profit. As the literature shows that mostly price is the main factors in shifting the area allocation of any crop while this paper shows that lag area was a main factor because the land of Khyber Pakhtukhwa is suitable for sugarcane production and mostly they produce Gurr from sugarcane which they used for self-consumption. . Improved technological innovations will boost the sugar-cane production. Hence, the Government should explore ways to make available the same to the farmers.

Keywords: Agricultural and Food Policy; Agricultural Finance; Crop Production/Industries; Production Economics; Productivity Analysis (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ijfaec:186272

DOI: 10.22004/ag.econ.186272

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