Estimating the Economic Viability of Cotton Growers in Punjab Province, Pakistan

Abstract

Considering the farmer’s decision of quitting cotton plantation due to low economic incentives, the current research is intended to evaluate the economic viability of cotton growers in Punjab. A comprehensively pretested questionnaire was used to gather the information from 240 cotton growers in face-to-face interviews. The cost–benefit ratio was estimated by calculating incurred variable costs, revenue generated, net farm income, and gross margin. The data envelopment analysis was applied to explore the economic, technical, and allocative efficiencies of the cotton producers. The second-stage regression analysis was also conducted to evaluate the socioeconomic factors affecting farmer’s efficiencies by applying the Tobit regression model. The small farmers were found to be most vulnerable group with low returns on investments and low technical and economics efficiencies score. The results also indicate that the financial constraints, difficulty to access agriculture credit, access to extension services, and lack of formal education are the main factors affecting farmer’s efficiency. The government should regulate the input prices and agriculture department should provide formal training to the farmers to adopt better management practices to reduce cost of production.