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An Ex Ante Impact Analysis on BRRI Dhan36 in Bangladesh

M. A. Quayum
Senior Scientific Officer
Agricultural Economics Division, BRRI, Gazipur-1701, Bangladesh.

M. A. Quddus
Senior Manager (Crop)
RDRS, Thakurgaon, Bangladesh.

Abstract/ Executive Summary:

An ex ante rate of return analysis was conducted using the economic surplus method in the small open economy model to estimate internal rate of return (IRR) of developing BRRI Dhan 36 in Bangladesh. The IRR to the total investment in BRRI Dhan 36 variety research and extension was calculated at 80%. Under different assumptions about the magnitude of the benefits, research and expenditures, the IRR ranged between 61% and 102%. When the adoption rate was half of the base year, the IRR was found lowest, when it was double of the base year then the IRR was highest. However, the individual BRRI Dhan 36 variety contributes 80% IRR which can be considered an acceptable rate of return to rice research and extension investment in Bangladesh. Thus, the ex ante analysis indicated that to the year 2015 the expenditure of BRRI for the research and development of this variety will be a good investment.

Keywords: BRRI Dhan36, Varieties, Bangladesh

Location:

Start Date:

End Date:

Program Area: Socio-economic and Policy

Commodity: Rice

Objectives:

1. To estimate the social benefits associated with BRRI Dhan 36 varieties research investment.

2. To estimate IRR from BRRI Dhan 36 variety research and extension investment in Bangladesh.

3. To provide information to policy makers, donor agencies, researchers

Methodology:

Researchers use different analytical techniques for analyzing the agricultural research benefits. Most of them need to have data over the years of research cost, extension cost, percentage of area covered by the modern variety or imported package technology. In this study, economic surplus method of ex ante analysis was used in the small open economy model. For this analysis, spreadsheet approach was used. Bangladesh produces rice domestically but also imports rice from the world market. A small open economy model was used because Bangladesh has no big influence on the world price of rice in the international market. Thus, there was little or no effect on the world price of the commodity. In this case, the price of the commodity did not change with a shift in the supply curve. So for this study, the Bangladesh rice market was modeled as a small open economy market. In addition, this study used different parameters in different rates to get the IRR in different assuming conditions. Market related data and research related data were required for the analysis. Market related data and information were generally collected from published sources. These data requirements for the analysis included rice production, price and output supply elasticity. Research related data were obtained from scientist and other informants as well as from unpublished reports. Research related data included yield advantage of modem variety, varietal adoption by the farmers, the input cost change, and research and extension expenditure. Rice production and harvest price of rice used in this analysis. For calculating the production for the next 15 years, the initial base quantity was used. Here the initial base quantity was 7358500 tons (BBS, 1998). This base quantity was the average production of last 4 years from the year 1994-1997. Production quantity was adjusted by the exogenous output growth and it was 7409000 tons in 1997. Price of bora rice was obtained by the 4 years' average price from the year 1994-1997. The average output price was Tk. 6097 per ton (BBS, 1998). Here price remained constant because although the commodity was traded, the country was not assumed to influence the world price. Boro rice output supply elasticity at 0.19. For this analysis, the used output supply elasticity was 0.19. For the sensitivity analysis, the used output supply elasticity Y was 0.19 and other assumed elasticity was 0.75. This analysis was for the small open economy model and the use of demand elasticity was not needed. Experimental trial for yield performance of BRRI Dhan 36 was started in 1998. BRRI Dhan 36 was compared with BR 14 because among the MVs of rice, BR 14 is a widely grown variety. Research related information was collected from the multi-location trial (MLT) at different regional stations under the on-farm condition and same management practices from the year 1995-1998 (Anon., 1995; Anon., 1996; Anon. 1997; Anon., 1998). On average, the yield of BRRI Dhan 36 was 6.97 t/ha and BR 14 was 5.87 t/ha and average percent of yield change was 18.74. Here the percentage of yield change was regarded as maximum yield change. There was no big difference between the input cost of BRRI Dhan 36 and BR 14 except seed cost. For the first 5 years of trial, no input cost would be changed due to same management practices done for all the experiments. In the next 5 years, input cost would be changed at 0.05 per hectare because it was assumed that the production of five years on the farmer's field, seed of this variety would not be available as the farmers' requirement. So price of seed of this variety would be higher compared to other varieties. And the remaining years, it was assumed that when seed was available, input cost would be changed by 0.01 mainly due to change of management cost. Net cost change was calculated by deducting the input cost change from the gross cost change per ton and probability of success was one because the research on this variety has ended successfully. It was assumed that research took at least five years before technologies were available. In the year 1997-2001, the adoption rate was zero because BRRI Dhan 36 had not yet cultivated by the farmers. After these five years, the increasing trend of adoption rate was assumed from the adoption rate experience of BR 14 which was 5.06% in 1998. It was known that linear depreciation began eight years after research commenced. From the year 1997 to 2004, the research depreciation rate was assumed to be 1 and after that year, it was assumed that depreciation rate would decrease by 5% per year. The Supply shifter K The supply shifter K identified the amount of production cost that could be attributed to varietal improvement research each year. The shift accounted for the yield advantage of variety BRRI Dhan 36 over BR 14. Here, supply shifter K was calculated by multiplying net cost change, probability of success, adoption rate and depreciation rate.

Source of Information: Bangladesh J. Agril. Res. 30(1): 105-115, March 2005.

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

BRRI Dhan 36 is a newly developed boro rice variety that gives higher yield compared to the most widely cultivated variety of BR 14. In this study, the benefit from the research cost of BRRI Dhan 36 was estimated with IRR which was 80% found by the ex ante analysis for the next 15 years. The IRR was estimated on the basis of some base parameters. In this analysis, the supply elasticity was 0.19. The maximum yield change, gross cost change per ton, commodity price, exogenous output growth rate were 0.187, 0.9842, Tk. 6097/ton and 0.0068, respectively. Base quantity in the year 1996 was 7358500 tons and research cost was Tk. 263250000. Eighty percent IRR was a good rate of return. Thus the analysis indicated that the BRRI Dhan 36 is a promising variety. Here, the yield advantage was an important parameter for which yield advantage information should be accurate for calculating the supply shift. In this analysis, yield advantage had been calculated by the 4 years trial data, but breeders stated that there were no fixed years to develop a variety but at least it took 7-8 years. So the average data were needed to be more than 4 ears of information. The aspect of foreign exchange earning had not been included because there was no available information of the methodology for this analysis. The most important part of analysis was research cost on variety basis. Every research institute expands their research cost for the development of many varieties at a time. So it is quite impossible to calculate the research cost needed for the development of specifically one variety. For the impact analysis, accurate and current data is an important factor. For this ex ante analysis of any variety, its adoption rate is vary important that tells how well this variety is accepted by the farmers. But adoption rate on variety of Boro rice is not available in most of the cases. In this study, information about adoption rate was calculated by the scientist's perception. For further improvement of modem varieties, BRRI should conduct extensive survey on the adoption rate on the variety basis so that it can be nationally accepted.

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