Project Summaries

10-725  Project Manager: J. M. Reeves

COST OF COTTON PRODUCTION IN INDIA: ECONOMIC IMPLICATIONS FOR U.S. COTTON PRODUCERS

Mechel Paggi, California State University, Fresno Foundation

The overall objective of this paper is to assess the competitiveness of Indian cotton producers and potential implications for India as a competitor in the world cotton market if it mechanizes some of the operations like harvesting. The mechanization of cotton harvesting includes not only the availability of suitable harvesters, but also depends upon availability of appropriate cotton varieties, changing some of the agronomic practices like the seed rate, nutrient application, etc. and finally its economic feasibility in India. In this context, this paper analyses the economic feasibility of cotton harvesting by mechanical means in India as well as the practical feasibility of the adoption of the mechanical harvesting by Indian farmers. This paper utilizes the representative cotton farm models developed by the authors to analyze the impact of economic feasibility of cotton harvesters. The results are further used to understand their impact on India's competitiveness in the international markets.

Cotton is a very important commodity in Indian agriculture, and it has played a major role throughout India's history. Recent technological advances and trade liberalization have made India a major player in international cotton markets. In 2010-11, India was the world's second largest cotton producer, consumer and exporter. The increasing role of the Indian cotton sector in international markets is a direct challenge to the U.S. cotton exports, especially in markets like China which accounts for 40 percent of the total mill use of cotton in the world. The importance of the Chinese market is going to increase in the future as China is expected to import cotton which is almost double that of present level. A better understanding of the Indian cotton production system is necessary in order to comprehend its future role in international cotton markets. Though India is the second most important producer of cotton in the world, the productivity in cotton production is very low compared to that of the world average. It is a major concern to its policy makers as cotton sector plays an important role in social and economic aspects of Indian society. Various reasons have been attributed to the existence of lower than world average yields in India like the inadequate inputs, lack of awareness about modern cultivation practices among Indian farmers, lack of irrigation facilities, lack of proper timing of field operations and too much dependence on labor to cultivate cotton. Along with the above reasons, the shortage of labor in some areas of India which are fast industrializing is impacting the profitability of the cotton crop. Within this context, a better understanding of the Indian cotton sector and the impact of mechanization on cotton cultivation is needed to assess India's competitive position in international markets.

Data were collected in two cotton producing states of India namely Gujarat and Maharashtra in 2012. These are the top two states in terms of production and acreage in India contributing about 73 percent and 75 percent of the total production and total acreage in India, respectively. Rapid Rural Appraisal (RRA) methodology has been adopted to collect information, where in a multidisciplinary team conducted focus group discussions in various villages to get information and develop hypotheses. In each state, information was collected from focus groups in different villages and the information was aggregated. There were a total of six focus group discussions conducted with three each in Gujarat and Maharashtra in summer of 2012. Each focus group constituted about 7-12 farmers and a survey instrument was used to provide structure to the discussion. The cost of production of cotton in Gujarat is 21 percent more than that of Maharashtra due to more usage of fertilizers and micronutrients and greater irrigation costs. In focus group discussions, the average yield of seed cotton that was reported in Gujarat was 1100 kg per acre compared to only 900 kg per acre in Maharashtra. The gross profit in Gujarat is considerably higher than in Maharashtra demonstrating the importance of higher yields prevalent in Gujarat. The gross profit excludes returns to family labor and managerial compensation.

This study also included an analysis of mechanical harvesting of cotton in India. The researchers have met representatives from agricultural equipment, seed and chemical firms to discuss and understand the various initiatives adopted by them to promote cotton pickers among Indian cotton farmers. Data about various trials in which cotton pickers were tested in Indian conditions were made available for this study. Information about additional inputs that are required and additional revenues due to higher yields possible due to adoption of new cultivation practices are obtained during discussions with industry representatives.

The results demonstrate that the net income of the cotton farmers represented from this study group will increase considerably with the mechanization of cotton harvesting. The results also show that the probability of earning a lower net income decreases, whereas the probability of earning a higher net income increases when harvesting is done by cotton pickers. But adoption of mechanical harvesting through cotton pickers by Indian farmers is not dependent upon just the availability of suitable harvesters, but also depends upon availability of appropriate cotton varieties, changing some of the agronomic practices like the seed rate, nutrient and defoliant application, pre-cleaning of cotton before sending it to cotton gins, and finally its economic feasibility in India. In order for the change in agronomic practices to be adopted by Indian farmers, the government extension agencies should play an active role in educating the farmers. The equipment manufacturers should come out with suitable equipment for Indian conditions like small land holdings and pre-cleaners suitable for cleaning cotton before sending them to cotton gins. Efforts also should be made by credit agencies to offer suitable credit facilities for farmers wanting to adopt mechanical harvesting and support should be also offered for establishing custom service providers. With the help of all the above public and private agencies, the adoption of mechanical harvesting of cotton by Indian cotton farmers can be successfully achieved. The mechanized harvesting of cotton in India may lead to increase in yields in Indian cotton farms and thereby the total cotton production in India. In this scenario, the international cotton markets may see more cotton from India which may impact the prices of cotton. But, further research needs to be done in order to understand the timeline of adoption of mechanized harvesting in India.

 

Project Year: 2012
 

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