AN ECONOMIC ANALYSIS OF GINGER PRODUCTION IN THUY BIEU WARD, THUA THIEN HUE PROVINCE

HUE UNIVERSITY COLLEGE OF ECONOMICS THE ADVANCED PROGRAM UNDERGRADUATE THESIS AN ECONOMIC ANALYSIS OF GINGER PRODUCTION IN THUY BIEU WARD, THUA THIEN HUE PROVINCE NGUYEN KHANH VAN Academic year 2011 - 2016 HUE UNIVERSITY COLLEGE OF ECONOMICS THE ADVANCED PROGRAM UNDERGRADUATE THESIS AN ECONOMIC ANALYSIS OF GINGER PRODUCTION IN THUY BIEU WARD, THUA THIEN HUE PROVINCE Name of student: Ms Nguyen Khanh Van Class: K45 Agricultural Economics – Finance Academic year: 2011 - 2016 Hue, June 2016 Name of supervisor: Assoc Prof Dr Bui Dung The ACKNOWLEDGEMENTS First of all, I would like to express sincere and profound gratitude to my supervisor Assoc Prof Dr Bui Dung The for his enthusiastic supervision during roughly three months of working on the thesis Without his help, I would never complete my undergraduate thesis I would also like to thank all office staffs in Thua Thien Hue Department of Agriculture and Rural Development as well as all officers in Thuy Bieu Cooperative their enthusiastic help on searching necessary data for my research Grateful acknowledgement goes to ginger households in Thuy Bieu Ward in Thua Thien Hue province, who were willing to participate in my survey, they treated me so well and kindly during the interview even though weather was extremely hot and they were very exhausted after working for hours under the sun I had many unforgettable memories with them within nearly twenty days doing interview and I truly love and miss them so much I would like to save my last gratitude for my family and my friends, I owe them everything and they mean the world to me I would never reach this point without their unconditional and immeasurable love I am absolutely indebted to their sacrifices and I love them more than words Nguyen Khanh Van Hue, May 2016 TABLE OF CONTENTS ABBREVIATIONS HA : Hectare GP : Gross Production value GM : Gross margin OLS : Ordinary Least Squares TB : Thuy Bieu Ward TC : Total cost TTH : Thua Thien Hue Province VND : Vietnamese dong LIST OF TABLES Table 1.1: Nutrition Facts of ginger .8 Table 1.2: Top Five Ginger Producing Countries 16 Table 2.1: The economic structure of Thuy Bieu from 2014 to 2015 20 Table 2.2: Total production value of Thuy Bieu (2013-2015) 21 Table 2.3: The population and labor of TB in 2015 .22 Table 2.4: The situation of using land in TB (2013-2015) 23 Table 2.5: Planting area and value of ginger production in TB (2013-2015) 27 Table 2.6: Age and Experience of ginger farmers .30 Table 2.7: Socio-economic characteristics of sample respondents 32 Table 2.8: The situation of planting area 33 Table 2.9: Input cost of ginger production 34 Table 2.10: Seed selection of household 35 Table 2.11: Fertilizer usage of households 36 Table 2.12: Detailed cost of Ginger production 37 Table 2.13: Yield of Ginger production .39 Table 2.14: Economic target of Ginger production .39 Table 2.15: Effects of planting area to Ginger production 44 Table 2.16: Effects of costs to Traditional Ginger production 45 Table 2.17: Effects of costs to In Bag Ginger production 45 Table 2.18: Estimates of the stochastic Cobb-Douglas frontier production function and technical inefficiency model for ginger 48 ABSTRACT The purpose of this thesis was to describe the economic analysis of ginger production in Thuy Bieu Ward, Thua Thien Hue Province The thesis's research design was quantitative and descriptive Farmers in Thuy Bieu Ward who have been planting ginger with kept records in their production during 2013-2015 became the thesis's population The unit of measurement was defined as Vietnamese Analysis of the 60 qualifying surveys took the form of descriptive statistical calculations and economic modeling in Cobb-Douglass, a production function The function in Cobb– Douglas production is widely used to represent the technological relationship between the amounts of inputs, particularly physical labor, seed, fertilizer, agrochemical and others (materials, loan…) and the amount of output of ginger that can be produced by those inputs In the end, the total thesis output effect from these factors was summed and extracted to describe the effect of farmer investments on the ginger production The study provided documentation to support the experiential planning mission of agricultural development As an average result of the VND 425,352 of gross production value, VND 218,029 of farmer total cost, an estimated total profit for the production equaled VND 207,323 It is important to notes that the majority of the thesis's impact came from the effect of the scale of production and the assumptions made about farmer spending The thesis revealed a 1.95 output multiplier; it meant each new VND spent by farmers, a VND 0.95 of product value was created The findings are consistent with other related economic researches and demonstrations on the region's economy Implications suggest a need for increased support of local authorities and other work-based agricultural encouragement programs A number of practices, including stronger emphasis on promoting economic acumen of farmers and greater accuracy of recordkeeping, could be instituted Following thesis recommendations could result in increased farmer participation in work-based knowledge improving and additional economic impact for Thuy Bieu’s economy Farmers with these opportunities are more likely to possess skills, ready to meet demands of a growing global economy PART I INTRODUCTION Statement of Problem Thua Thien Hue province which is in the North Central is strongly influenced by the humid tropical monsoons climate Soil is very diversified and distributed on a variety of terrains However, the area of land for annual crop is small about 59,143.29 hectares, accounting for 15.35% the area of agricultural land, which makes farmers’ income unstable because of heavy dependence on rice and perennials Dealing with this situation, in recent years all levels of the province has made great efforts in restructuring plants, creating suitable alternative plants which have high economic value, meet the demands of the market and increase famers’ income Ginger is the one of the most important and most widely used spices worldwide Due to its universal appeal, ginger has spread to most tropical and subtropical countries from the China-India region, where ginger cultivation was prevalent probably from the days of unrecorded history In ancient time, ginger was more valued for its medical properties and played an important role in primary health care in India and China Ginger has been grown for long time in Hue city as a spice plant serving the needs of the family Through many years of cultivation, ginger proved to be quite easy to grow and suitable to cultivation conditions here Thuy Bieu which is a ward of Hue city has a lot of households growing ginger for long time According to the Agricultural cooperative of this ward, I know the majority of farmers planting ginger in traditional method which means growing ginger in land so it is difficult to care and prevent diseases and disasters On the other hand, Thuy Bieu ward covers a large area land of perennials especially Thanh Tra pomelo tree The development of Thanh Tra pomelo plants has brought huge economic efficiency to the local and contributed to change the rural face of Thuy Bieu in recent years However, the Thanh Tra pomelo tree is perennial with five year period from planting until the first harvest, so it is big waste for a fertile alluvial area here during that period when the soil is idle From this reality, farmers of Thuy Bieu ward actively found out a new ginger method using more kinds of seedlings with high economic efficiency for intercropping in order to utilize idle land area under Thanh Tra plants Recently model of growing ginger proved to be a new and effective one in many parts of our country Realizing the potential of this model on the ward area, The Agricultural co-operative bravely piloted in the local and initially obtained positive results However, farmers here are still quite unassertive due to long production practices and fear of no output Through research, I find it necessary to apply my knowledge gained from the University for helping farmers here see the opportunity from ginger then they can get suitable production directions to solve the existing problems in the production situation here In the final course internship, I was given a chance to visit the local by my university for grasping the specific situation so I decided to choose the theme: "An economic analysis of ginger production in Thuy Bieu Ward, Thua Thien Hue Province" According to this research, I hope to contribute partially for providing give the local authority and people useful supporting information to get proper production direction in the future Objective of Research 2.1 General objective: Under these circumstances, the principal purpose of the thesis is analyzing of economic of ginger production in Thuy Bieu ward, Hue province According to the research’s results to put forward proposed solutions to improve the economics of ginger production, as well as promoting the consumption and production of ginger in Hue 2.2 Specific objective There are three specific objectives which will be resolved and fulfilled clearly throughout three main parts of the thesis In the first part, the thesis aims to describe 10 Amount of NPK fertilizer (β4): The coefficient of NPK fertilizer use was positive and significant at percent level for ginger farmers The production elasticity with respect to NPK fertilizer is 0.049 By increasing the quantity of NPK fertilizer use by percent amount of farm output will only increase by 0.049 percent for these farmers Amount of Manure (β5): The coefficient of amount of Manure had a positive sign for these farmers and significant at percent level for the ginger farmers in the study area If amount of manure is increased by percent, total amount of ginger output level will increase by 0.057 percent for the farmers Training (β6): This variable has the expected positive signs and significant at 5% for ginger farmers This implies that the technical efficiency of ginger farmers will increase with increase in the above variables The difference between training and non-training household is quite clear If other factors not change, the training households will have higher yield than non-training one 1.049 time This says that in order to limit the risk of planting, the household should register training courses on agricultural techniques for ginger, this really makes sense for improving productivity of ginger in Thuy Bieu So the results of the thesis show that farmers were technically efficiency in the use of inputs The problems encountered in the study area were ineffective using labor, high cost of input, attitude of the farmers to change, inadequate knowledge of marketing and record keeping In summary, above findings are appropriated with assessment on last sections These are important foundations in order to make solutions to improve the efficiency of ginger production in Thuy Bieu Ward and Thua Thien Hue Province also CHAPTER 3: ORIENTATIONS AND PROPOSED SOLUTIONS TO DEVELOPTMENT OF THUY BIEU GINGER 3.1 ORIENTATIONS To promote economic efficiency of ginger more, the whole Ward’s orientation in future is to focus on development of ginger growing areas According to the ward’s planning, ginger cultivation area of around 18 hectares will be formed in Thuy Bieu The current area is only about 6.6 hectares Economic efficiency of investing in ginger development and building Hue ginger brand: According to the above plan and with stable average yields of 50-60 tones / hectare, in the future when planning area gives stable productivity, Thuy Bieu ward can get the output of 1000-1200 tons of ginger per crop If the price is 25000 dong / kg, the revenue from ginger can reach 25-30 billion dong per crop Thus, with the above planning and proper investment, ginger plants will be high-quality goods and products that bring more economic benefits As planned, the forming of ginger-growing areas contributes to plant restructure and creates products of high economic value serving the increasing demand for domestic and enabling export capability to the foreign markets However, a large number of products with excellent quality is not enough to guarantee the consumption of goods but it is also necessary to develop Hue ginger brand to promote consumption If this stage is not well implemented, the economic efficiency of the ginger plant will decrease when there is the ginger price competition from other locals or other countries such as China From the economic benefits of ginger and Hue ginger branding, there are 02 main directions and tasks in developing Hue ginger in 2016-2017 as: a Expanding planting area and improving productivity, quality of the product: - Expanding the area of growing as in approved plan Renovating growing areas with low quality Building garden of seed ginger with high quality Applying technologies in post-harvest preservation to extend the crop season and - product salability Applying intensive farming methods Expanding the network of electricity and water to cultivation areas which are away from residential area to improve productivity and irrigation b Consumption of products: - Establishing of the purchasing and consuming sections Developing the product sales network Managing the printing and using of brand of Hue ginger Enhancing Hue ginger promotion like posting on website, Facebook etc, and participating in agricultural fairs 3.2 SOLUTIONS 3.2.1 Planning and expansion the production area of ginger Current ginger production is incommensurate with the potential and advantages of the local Scale of the growing area is narrow while the capable area of planting ginger is huge Therefore, the households should bravely invest in renovating gardens and replace the areas of ineffective crops and short-day crops with high capacity of planting ginger for ginger cultivation Or else, farmers can conduct planting gingers in bags below the foliage of Thanh Tra trees whose foliage is unclosed Measures for improvement and renovation of mixed gardens or ginger intercropping as follows: For intercropping with Thanh Tra trees: Planning the intercropped area of ginger and Thanh Tra on the newly planted Thanh Tra area of 19 hectares, its planting area has just been expanded so the trees are in the process of closing foliage The lighting area is also very large which is convenient to put ginger bags around the tree roots This intercropping not only takes advantage of idle land but also limits the weed growth, which decreases the productivity of Thanh Tra and helps farmer reduce waste in weeding For mixed garden: For too bad and mixed garden with plants bringing low economic efficiency, farmers should demolish, clean the garden and plant ginger People need select appropriate types of seed with this land combined with the advice and guidance of the technical staff 3.2.2 Solutions for seed and technique to improve ginger productivity a Seed Currently people have the habit of using the local the “de ginger” (a kind of ginger with small root, more fiber and spicy), so the productivity is not high and cannot compete on price and design with “Trau ginger” Hence, it is necessary to open training class with direct instruction of technicians for farmers to plant ginger technically, especially “Trau ginger” seed (kind of ginger with big root, fat body, less spicy) which is still unfamiliar with the farmers here Farmers should be encouraged to use this type of seed because of its high productivity and good ability of resistance At the same time it is essential to contact the seed center for good and qualified seed supply source b Technique solutions Seasonal factor: Based on climate conditions and the local topography, the most appropriate time to plant is in May (lunar calendar) However, there are crops for planting ginger in bag: one is in May (lunar calendar) and the other in two off-seasonal months November and December (lunar calendar) Off-seasonal crop may not bring high yield but high prices and big profits Fertilizers: Soil in Thuy Bieu is generally sour, poor protein and potassium, so renovating acidity and improving fertility of soil need to be concerned In general, ginger requires high intensive cultivation, more animal manure and green manure Therefore, the current husbandry situation should be maintained to overcome losses of animal manure For ginger planting in bag, farmers need fertilize with proper amount technically and timely to help plants get enough nutrients for the process of swelling and forming root Plant protection: Pests and diseases pose the largest production concern to most ginger growers and are a constant threat to yields All growers anticipate some losses every season due to disease so people should monitor the situation of pestilent inspects for ginger to get timely preventive measures to have right solutions timely 3.2.3 Solution for capital To develop production, capital is very important For method of planting ginger in bag, the requirement of the initial capital investment is relatively high Because of the limited opportunity to access to official credit sources such as banks or supporting fund as well as fear of inability to repay, farmers are not brave to borrow money to invest in production Therefore, local authorities and union organizations should actively create conditions for farmers to access to capital source through credit projects with preferential interest rates 3.2.4 Solution for consumption market Increase searching information about consumption markets within and outside the Province Set up the buying facilities to prevent buying- selling situation again and again and prices pressure for farmers and create stable information to give the position between buyer and seller To have good design and quality to get the position in the market and export value, the stage of harvesting needs to be noticed Famers should not harvest ginger by rakes, hoes but by hands to avoid cutting into gingers, which makes them quickly dehydrated when stored long-term PART III: CONCLUSION AND RECOMMENDATIONS CONCLUSION Based on analysis of data and the information about characteristics of 60 households in the resettlement area derived from the 2013-2015 summary results available from the review and survey in Thuy Bieu Ward, we have gotten an overview of the economic situation as well as the ginger production in there Thuy Bieu has a lot of advantage characteristics of natural climate, social and economic for the development of agricultural plant, including ginger Although the cultivation area of ginger in TB area is still low with only 6.6 hectares (2015) but it has also brought a high income to farmers The thesis is designed to assess the economic analysis of ginger production in the resettlement area located in Thuy Bieu Ward, Thua Thien Hue Province According to the framework of theories and previous researches, the best regression models are managed to run with the dependent variable, namely, the yield per hectare of poor households, and independent variables (labour man-day, amount of seed, fertilizer, amount of water irrigation and knowledge training) The analyses carried out in this thesis suggest that most of input factors used appropriately by households in planting have given positive effects for the ginger production In particular, the in bag model households would have a higher level of income and yield per hectare than those of traditional model by 4.8 times respectively This difference is relatively important to trend of ginger production in the future Although the positive impacts of the trained technique and knowledge are partly limited, the thesis also indicates that there are other factors affecting the production of the farmer For example, the amount of seed and water irrigation of the household has a positive and statistically significant relationship For the fertilizer (NPK and manure) of the household, it affects significantly the yield of households at lower level Another factor affecting the production of households is the labour man-day used It has a negative and significantly significant impact on the yield of households which shows us the shortage of high-tech equipment and good management in using agricultural labour In conclusion, the results of the research might have an implication that the households have planted ginger should change their planting model from tradition to the in bag to achieve higher yield and profit Depending on the using purpose, high-quality ginger products with special flavours or high yield ginger for wholesaling, farmers have to consider selecting the type of ginger to plant: De ginger or Trau ginger Although Trau ginger has higher yield but most people in Hue still prefer De ginger for their daily use Through many years, ginger brings higher income for farmers in TB Therefore, the ward should have guidelines to expand planting area, convert most of planting area from traditional model into in bag area As the current potential, experts expect that the area of ginger will be up to 15-20 until the end of 2016 To achieve that goal, they need promoting the plan, apply the intensive farming method to increase productivity, create off-season products, strongly advertise the brand of Hue ginger, participate in the Expo… it towards the highest goal is to produce ginger with higher economic efficiency RECOMMENDATIONS Based on the shortcomings and limitations in the development of TB Ginger, I would like to give some recommendations as follows: a For local authorities: - Find more potential markets for ginger products create favorable conditions and - encourage organizations to export ginger Increase scientific research and investment of bio-products to increase productivity - and quality of ginger Completing the plan and implementing the planning the region of ginger planting - in a specific way and complete roadmap Building the processing, storing and consuming facilities at the local - Conducting researching and forecasting the market to provide information about - the price in time for people in production and consumption plan Strengthening technical training courses about planting ginger for improving - farmers' knowledge Regularly monitoring the disease situation in the ginger plant to promptly notify for people to prevent properly and use right types of fertilizer with the appropriated - amount Continuing improving the facilities and the technical infrastructure b For Farmers - Quickly study the new advances in ginger production combined with experience to form a method suitable for their own conditions and gradually change outdated and - inefficient habits Farmers need more bravely borrowing money in order to invest equipment and - expand planting area Fully participate in training course for timely receive useful information about the production process of ginger and market price REFERENCES Allen, R.G.D Mathematical Analysis for Economists New York: Macmillan Co., 1938) Arrow, K., H.B Chenery, B Menhas, and R.M Solow "Capital Labor Substitution and Economic Efficiency." 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Propensity score matching based on a national-level household data’, Development Economics and Public Policy Working Paper Series, no 17, University of Manchester Baulch, B and McCulloch, N 1998, ‘Being poor and becoming poor: poverty status and poverty transitions in rural Pakistan’, IDS Working Paper, no 79, Institute of Development Studies 10 Chowdhury, A J M., Ghosh, D and Wright, E R 2002, ‘The impact of micro- credit on poverty: evidence from Bangladesh’, Progress in Development Studies, vol 5, no 4, pp 298-309 11 Erinle, I D (1988) An Overview of Research of Ginger Production in the northern states of Nigeria(p 8) A paper presented at the 1st National Workshop on Ginger National Root Crop Research Institute (NRCRI) Umudike, Nigeria, October 17th-21st, 1988 12 Coleman, B 1999, ‘The Impact of group lending in Northeast Thailand’, Journal of Development Economics, vol 60, no 1, pp 105-141 13 Farag Seerag El Din A., Aziz Nagy H., and Attia El Sained A 1995 Effect of irradiation on the microbiological status and flavouring materials of selected spices Zeitschrift fuer Lebensmittel Untersuchung und Forschung 201(3):282-288 14 Govindarajan, V.S 1982 Ginger - chemistry, technology, and quality evaluation: Part Crit Rev in Food Sci & Nutr 17:189-258 15 Lawrence, B.M 2000 Progress in Essential Oils Ginger Oil Perfumer and Flavorist 25 (2):55-58 16 Baranowski, J.D 1985 Storage stability of a processed ginger paste J Food Sci 50:932- 933 17 Introduction of Thuy Bieu Ward https://thuybieu.thuathienhue.gov.vn/? gd=21&cn=35&cd=3 (Accessed 2016-04-20) APPENDICES Appendix A: Regression Results for Evaluating Impacts of Input cost to Ginger Productivity of Household in Thuy Bieu Ward Dependent Variable: PRODUCTIVITY Method: Least Squares Date: 05/29/16 Time: 20:45 Sample: 60 Included observations: 60 Variable Coefficient Std Error t-Statistic Prob LN_NPK 0.049044 0.036415 1.346823 0.0394 LN_MANURE 0.056714 0.023353 2.428517 0.0186 LN_LABOR -0.382379 0.044373 -8.617362 LN_IRRIGATION 0.827442 0.067435 12.27017 LN_SEED 0.536156 0.032465 16.51468 TRAINING 0.048029 0.019713 2.436413 0.0182 C 1.365515 0.280495 4.868239 R-squared 0.856567 Mean dependent var 9.519003 Adjusted R-squared 0.856179 S.D dependent var 0.821671 S.E of regression 0.050792 Akaike info criterion -3.012873 Sum squared resid 0.136731 Schwarz criterion -2.768533 Hannan-Quinn criter -2.917298 Log likelihood F-statistic Prob(F-statistic) 97.3862 2564.555 Durbin-Watson stat 1.948452 Appendix B: Test Heteroskedasticity for Evaluating Impacts of Input cost to Ginger Productivity of Household in Thuy Bieu Ward Heteroskedasticity Test: Breusch-Pagan-Godfrey F-statistic 0.793084 Prob F(6,53) 0.5795 Obs*R-squared 4.943171 Prob Chi-Square(6) 0.5511 Scaled explained SS 4.100611 Prob Chi-Square(6) 0.6631 Test Equation: Dependent Variable: RESID^2 Method: Least Squares Date: 05/29/16 Time: 20:51 Sample: 60 Included observations: 60 Variable Coefficient Std Error t-Statistic Prob C -0.007802 0.018704 -0.417143 0.6783 LN_NPK -0.003492 0.002428 -1.438196 0.1563 LN_MANURE -0.001557 0.001557 -1.000178 0.3218 LN_LABOR -0.000182 0.002959 -0.061427 0.9513 LN_IRRIGATION 0.005216 0.004497 1.159878 0.2513 LN_SEED 0.001941 0.002165 0.896601 0.374 TRAINING 0.001664 0.001314 1.266118 0.211 R-squared Adjusted R-squared 0.082386 Mean dependent var 0.002279 -0.021495 S.D dependent var 0.003351 S.E of regression 0.003387 Akaike info criterion -8.428554 Sum squared resid 0.000608 Schwarz criterion -8.184214 Log likelihood 259.8566 Hannan-Quinn criter -8.332979 F-statistic 0.793084 Durbin-Watson stat Prob(F-statistic) 0.579469 1.798377 Appendix C: Questionnaire on the Economic Analysis of Ginger Production in Thuy Bieu Ward, Thua Thien Hue Province Researcher: Nguyen Khanh Van (Ms.) – Hue College of Economics Date: April 2016 Code: ……… (This information is only used for research purpose) I Household details: Full name: Address: Gender : Age: Education Level: Time of planting experience: Household’s status: □ □ □ Economic Poor Normal Rich I.1 Situation of household member: Item Quantity Total people in family Agricultural Labor Non-agricultural Labor Mixed labor I.2 Situation of cultivation and land area: - II Land type Agricultural land Annual cultivation land Ginger planting area Area (m2) SITUATION OF GINGER PRODUCTION Crop per year Model Yield (kg) Area (m2) Price (1000 / kg) Gross Production value (1000) Tradition In bag II.1 Input tools: Estimated cost (1000) Item a Tractor, excavator… b Water irrigation c Transportation d Sprayer e Buying tools f Other own tools II.2 Production cost: Item Seed De ginger Trau ginger Labor man-day Agrochemical Loan NPK Fertilizer Manure Microbiologic Fertilizer Other Unit Quantity Buy Own Unit price (1000) Total cost (1000) Kg Kg Kg 1000 1000 1000 Kg Kg Kg II.3 Would your family like to expand your ginger planting area in the next time? Reasons? …………………………………………………………… …………………………………………………………………………………… ….……………… Disadvantage Lack of capital Ye s N o Requirement Borrow capital with low interest Yes No Lack of seeds Buy seed with good quality Lack of cultivation area Lack of machinery and labor Lack of knowledge of farming Lack of market Rent cultivation area information Natural disasters Pest and disease Rent machinery and labor Attend agricultural training course Be provided timely information Be supported to overcome the damages Be timely warned Other: Other: II.4 Trading information a) Where you often buy production materials? □Seed trade center □Material agent □Small shops Other: ………………………………………………………………………………… b) Method of payment: □Immediately payment □Deferred payment □Pay after crop ends Other: …………………………………………………………………………………… II.5 Knowledge and training: Have you attend any training course related ginger production? Yes □ No □ State the latest course you attend if any: - Course’s name: Time: Thank you very much for your cooperation!