Study Area and sample selection The study areas were selected purposively where jute and jute goods produce intensively. Depending on the percentage of the total production and availability of data, five major jute producing districts namely, Faridpur, Kurigram, Kushtia, Jessore and Jamalpur were selected. Talma, Kanaipur and Khalilpur under Faridpur, Ulipur and Durgapur under Kurigram, Katuadah and Baragangdia under Kushtia, Monirampur under Jessore, Raniganj and Nandina under Jamalpur districts were selected for collection of production related data from different categories (small, medium and large) of jute growers. A total of 150 jute growers (30 from each location) were selected randomly according to the objectives of the study. Data were collected from the selected respondents through face to face interview method using a structured questionnaire during the period from July 2010 through June 2011. On the other hand, financial profitability of Aus, which is an alternative crop of jute, was obtained from the secondary sources of Bangladesh Rice Research Institute.
Economic Profitability Assessment: Economic profitability of jute and its competing crop Aus was measured including an assessment of comparative advantage using policy analysis matrix (PAM). The basic information needed for constructing a PAM are yield, inputs and the market and social prices of inputs and outputs. Inputs are divided into two categories: i) Traded intermediate inputs and ii) Non-traded intermediate inputs. In this study, land, labour, animal power, seed, pesticides, manure, irrigation and land preparation charge, interest on operating capital are considered as non-traded intermediate inputs and domestic resources. The costs of these inputs were collected from field survey. Though irrigation equipment is traded intermediate inputs, but detailed cost of production figure for irrigation equipment was not available. Since this item was not taken into account in the estimation of cost of traded intermediate input costs, only chemical fertilizer viz., Urea, TSP and MOP were considered as traded intermediate inputs for estimating costs. After the tradable and non-tradable inputs are classified, market prices of inputs are converted into social prices. Market prices were used to calculate the financial analysis for the private profit. Social prices of tradable and non-tradable inputs were determined to conduct the economic analysis of alternative crop production for the whole economy. In this case social prices are equal to their opportunity cost for non-tradable inputs. An average official exchange rate of 2010-11 was used in this study, which is taken from Bangladesh Bank (2012) and the corresponding exchange rate is Tk. 71.17 per US dollar. The study used FOB price for urea (Ukraine), TSP (US Gulf ports) and MP (Morocco) from the same source. Freight and domestic handling cost were collected from Rashid (2009) and extended to 2010- 11 using the non-agricultural wholesale price indices. For constructing social budget, the study used specific conversion factors 0.75 and 0.86 for labour and irrigation charge respectively and full social costs of seed/seedlings, insecticide and manure from secondary sources (Shahabuddin and Dorosh, 2002). Social prices of traded goods were calculated through border prices. For imported items, border price was computed through import parity price, which is the world market price in domestic currency obtained after adjusting the transport cost and other market distortions to the domestic markets. For export items, export parity price was computed by deducting the transport and other marketing cost from the farm gate to the point of international export market. Opportunity cost of operating capital was calculated at a 10 percent rate of interest for the production period of the respective crops. The payments for non-traded intermediate inputs and resources were also converted into per unit of output by adjusting yields.
Procedure for Calculating Border Parity Prices: The import and export parity prices at farm gate level computed from the border parity prices by adjusting the social cost associated with moving the imported commodity from border to farm gate or moving the export commodity from farm gate to border. For determining the parity price at farm gate level, the border price adjusted with the marketing, transportation and processing cost computed using secondary sources.
Export Parity Price of Jute: The world price of jute represented the f.o.b. price Chittagong. Border price measured at farm gate equal to world price time's official exchange rate less export handling, transportation cost, trading cost and interest on the operating capital for four months. World price (f.o.b. Chittagong) of jute was obtained from secondary source. Interest on operating capital for jute was collected from field survey. Export handling cost was the main cost of exporter excluding transportation cost which consisted of loading and unloading, rope making, hessian ticket, pressing charge, stacking, export brokerage, commission to C&F agents, bank interest and insurance charge, which were obtained from field survey. Trading cost was the cost of all marketing intermediaries from farmers to exporters and these were obtained from field survey also.
Import Parity Prices of Fertilizers: Import parity prices of three chemical fertilizers viz., Urea, TST and MP were computed from their international prices during 2010-11. The world price of Urea was c.i.f. price Chittagong, which was equal to F.O.B. Ukraine plus ocean freight from Middle East to Chittagong. The boarder price measured at farm gate represented the c.i.f. price Chittagong time's official exchange rate plus domestic handling cost from port to wholesale market to farm gate. The world prices of TSP (US Gulf ports) and MOP (Morocco) were computed following the similar procedure
Import Parity Price of Rice: The F.O.B price of rice (Thailand) was collected from Food Outlook of GIEWS. In this study, Dhaka is taken as a wholesale market for rice because marketing, import and export routed and centered through Dhaka (other studies for example Mahmud et al. 1994; Huda 2001; Rashid 2009 also used in the similar way). Then the c.i.f. price of rice at Chittagong plus transport cost from Chittagong to Dhaka, import handling cost and domestic trading cost less cost from mill gate to wholesale represented the border price at mill gate. From this, milling cost of rice was subtracted by adjusting milling rate. Cost from mill gate to wholesale, milling cost and cost from farm gate to mill gate were collected from Dewan (2011). Since the import handling cost was not found, this cost was considered as 3% of c.i.f. prices of rice (Huda, 2001).
Policy Analysis Matrix (PAM) Framework: The Policy Analysis Matrix (PAM) is a computational frame-work for measuring input use efficiency in production, comparative advantage and the degree of government interventions (Mohanty and Chaudhury, 2002). An application of PAM approach was used to assess the efficiency and competitiveness of jute production in Bangladesh. The assessment of competitiveness and economic efficiency of jute and its competing crop Aus at the farm gate level in Bangladesh are undertaken and the necessary indicators are derived to explain in the private profitability, social profitability and divergence.
Domestic Resource Cost (DRC) Calculation: In this study, DRC will be used to examine the efficiency of using resources to produce jute and Aus crop at home instead of importing the same from abroad. DRC was used for determining economic profitability of jute and its competing crop (Aus), which was calculated by using the following equation (Bruno, 1972):
DRC= (Cost of domestic resource and non - traded inputs for producing per unit of output)/(Value of tradable output - Value of tradable inputs)
If the DRC ratio is less than one, the system uses domestic resources efficiently, thus has comparative advantage. If the DRC ratio is greater than one, then the system shows inefficiency in domestic resource use and possesses a comparative disadvantage.