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Research Detail

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Md. Akhtaruzzaman Khan
Assistant Professor
Department of Agricultural Finance in Bangladesh Agricultural University, Mymensingh, Bangladesh

Kristin H. Roll
Associate Professor & Co-Supervisor
UMB School of Economics and Business, Norwegian University of Life Sciences, P. Box 5003 N-1432 Ås NORWAY

Atle Guttormsen
Professor & Supervisor
UMB School of Economics and Business, Norwegian University of Life Sciences, P. Box 5003 N-1432 Ås NORWAY

Pangas fish is relatively a new and fast growing fish species which has great potential for expansion and export earnings in Bangladesh. But production or output variability is observed from farm to farm and location to location, and indicates that production risk may be a problem in pangas farming. Traditionally small-scale farmers are found to be risk-averse, and research on production risk is therefore of great importance. This study investigates the production risk of pangas farming in selected areas of Bangladesh. Just-Pope stochastic production functions were chosen for the estimation of mean and risk function. Test result shows that significant production risk exists in pangas farming. Increased usage of fingerling increases the production risk in the studied area. Feed usage is found to have a risk-increasing effect on production for large farms, while it is the opposite for small farm. This may be a result of credit restrictions small farms often suffer from, which makes them unavailable to buy the optimal amount of supplementary feed. Further, access to credit and training is found to be risk-reducing in the case of small farm and medium farms. Therefore, to reduce production risk and hence increase the utility of small-scale pangas farmers in Bangladesh, the government should work to make credit more available also for small-scale farmers, as well as arrange for adequate training programs. 

  Pangas fish, Production risk, Just-pope, Bangladesh
  In Bangladesh
  00-00-2010
  00-00-2010
  Animal Health and Management
  Pangus, Farming System

To make financial and institutional-based policy for expanding the pangas fish farming in Bangladesh.

Just and pope has proposed two ways of estimation procedure to measure the production risk; maximum likelihood (ML) method and three-step feasible generalized least square (FGLS) methods under heteroskedastic disturbance (Just and Pope 1978; 1979). Since then, most of the empirical studies on production risk have used linear or non-linear FGLS estimation methods of the Just-Pope stochastic production function. For the large sample, both FGLS and ML estimates are consistent and efficient for mean function but FGLS is not efficient for variance function while ML is consistent and efficient (Tveteras 1998; 1999). Moreover, the ML estimator is more efficient and suffers from less bias than FGLS for the small sample. In addition, FGLS is found to seriously play down the risk effects of inputs and provide biased marginal product estimates (Saha et al. 1997).  We use Cobb-Douglas specification for both mean and variance function. Initially, we used linear quadratic functional form for mean and risk functions, but most of the square and cross-product terms are not significant. Therefore, we decide to use Cobb-Douglas functional form. The production function is specified with five inputs: labor, fingerlings, feed, capital and pond area/ farm size3. Labor, fingerling and feed are the main variable inputs for pangas fish farming. In addition, capital and farm size (pond area) is considered as a quasi-fixed factor in pangas production process4 According to above discussion, our empirical model production function is as follows. . We also incorporated five socioeconomic variables which may influence the production variability in the production process. These socioeconomic variables are the education of the farmers (year of schooling), experience in fish farming (years), training received from any institution on fish farming (number of days), credit received or not (dummy) and extension service from any government organization or NGO’s (dummy). Although pangas culture is relatively new in Bangladesh, it has flourished within a decade. Therefore, historical data on pangas farm, production, area, growth etc. are not available before 20066 This paper is based on cross-sectional primary data which is collected during June/2010 to August/2010 through the “personal interview” methods. Three stages sampling technique was used to select the samples in the study area. Mymensingh, Bogra, Narshingdi, Sherpur, Jamalpur, Kishorgonj and Tangail district were all appropriate districts with significant Pangas production. In first stage, Mymensingh district was purposively selected because pangas fish farm has expanded tremendously in this district due to suitable agro-climatic conditions (see Figure 1 for the localization of the region). Mymensingh district is situated in the north-central part of Bangladesh and it is only 120 kilometers north from capital city of Dhaka with good communication, favorable resources, good climatic condition, abundant labor and favorable socio-economic condition for fish culture. Total area of Mymensingh district is 4363 square kilometers with a population of 4.49 million where 1.33 million acres is used as cropped land and 76825 acres for fish culture (http://www.bbs.gov.bd/RptZillaProfile.aspx 2007). Mymensingh is the second largest fish-producing district after Chittagong where total inland fish production was . According to Department of Fisheries (DoF) statistics, the total pangas production was only 9.2 thousand metric tonnes in 2006-07 but it grew up to 124.8 thousand metric tonnes in 2009-10 which consists of 9.23% of total aquaculture production and 10.94% of total pond fish production(DoF 2006-07; DoF 2009-10). This paper is based on cross-sectional primary data which is collected during June/2010 to August/2010 through the “personal interview” methods. Three stages sampling technique was used to select the samples in the study area. Mymensingh, Bogra, Narshingdi, Sherpur, Jamalpur, Kishorgonj and Tangail district were all appropriate districts with significant Pangas production. In first stage, Mymensingh district was purposively selected because pangas fish farm has expanded tremendously in this district due to suitable agro-climatic conditions (see Figure 1 for the localization of the region). Mymensingh district is situated in the north-central part of Bangladesh and it is only 120 kilometers north from the capital city of Dhaka with good communication, favorable resources, good climatic condition, abundant labor and favorable socio-economic condition for fish culture. Total area of Mymensingh district is 4363 square kilometers with a population of 4.49 million where 1.33 million acres is used as cropped land and 76825 acres for fish culture (http://www.bbs.gov.bd/RptZillaProfile.aspx 2007). Therefore, we expect that higher education can reduce the output variability for all types of farm. We expect more experienced farmers know more about the culture system and can reduce risk compare to less experienced farmers.

  Norwegian University of Life Sciences, NO–1432 Ås, Norway; ISBN 978-82-575-1098-5, ISSN 1503-1667
  
Funding Source:
  

Production variability is observed from farm to farm and location to location in the pangas fish farming in Bangladesh due to differences in input use behavior and socioeconomic condition among the different farm sizes. Giving emphasis on this issue, this paper is focused on the estimation of production risks of pangas fish farming for average farm as well as small, medium and large farm. The Just-Pope (1978) model is used to investigate the influence of input use on production and risk level among pangas farmers using cross-sectional data collected from Mymensingh district in Bangladesh. The result shows that, labor, fingerlings, feed and capital significantly increase the mean production as expected. Log-likelihood ratio test reveals that significant production risk is exist in pangas fish farming. According to the estimates feed and capital have risk-reducing effects while fingerlings and farm size (pond area) have risk-increasing effects considering all farms. Results also reveal that training and extension service reduces the production risk significantly. Feed is the most important component of cost for pangas production which is risk-reducing input for small farm but risk-increasing for large farm. This is because, large farmer use sufficient amount of feed or sometimes overfeeding can occur where fish is not able to digest all feed and excess feed is harmful for pond environment which increases the production risk. But small farm supply less than optimal feed during culture period and among the small farmers feed use varies farm to farm. This is happening because most of the small farmers have no access to institutional credit due to high collateral. This explanation is supported by the risk-reducing effects of credit for small and medium farm which reflects that among small and medium farmers who received credit may buy risk-reducing input like feed, capital with the credit money. Pangas is a capital-intensive farming system where a good amount of money is needed during cultural periods, but most of the fish farmers are not financially solvent. Even though, Bangladesh Krishi Bank has credit scheme for the fish farmers but it is not sufficient to compare to demand. On the other hand, different private bank provide fish loan for large farm with a high-interest rate. Therefore, the government should take more initiative to provide loan especially for small and medium fish farmers with low-interest rate and less collateral for expanding the pangas fish farming in Bangladesh, and reduce the risk for small scale farms

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