IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v10y2022i3p59-d765889.html
   My bibliography  Save this article

Understanding the Profitability, Supply, and Input Demand of Tobacco Farms in Khyber Pakhtunkhwa, Pakistan

Author

Listed:
  • Sajjad

    (Department of Economics, Faculty of Business and Economics, Abdul Wali Khan University Mardan, Mardan 23200, Pakistan
    Pakhtunkhwa Economic Policy Research Institute (PEPRI), Abdul Wali Khan University Mardan, Mardan 23200, Pakistan)

  • Zahoor ul Haq

    (Department of Economics, Faculty of Business and Economics, Abdul Wali Khan University Mardan, Mardan 23200, Pakistan
    Pakhtunkhwa Economic Policy Research Institute (PEPRI), Abdul Wali Khan University Mardan, Mardan 23200, Pakistan)

  • Javed Iqbal

    (Department of Economics, Faculty of Business and Economics, Abdul Wali Khan University Mardan, Mardan 23200, Pakistan
    Pakhtunkhwa Economic Policy Research Institute (PEPRI), Abdul Wali Khan University Mardan, Mardan 23200, Pakistan)

  • Muhammad Faisal Shahzad

    (Pakhtunkhwa Economic Policy Research Institute (PEPRI), Abdul Wali Khan University Mardan, Mardan 23200, Pakistan)

Abstract

Several studies investigate the various aspects of tobacco at the processing and cigarette manufacturing levels, but the profitability, supply response, and input demand of tobacco farms in Pakistan remain unknown. Our study fills this gap by examining farm-level profitability, input demand, and output supply using survey data of 140 tobacco farms by employing a profit function approach. The results show that tobacco production is not very lucrative at the farm level and farmers are responsive to changes in market prices for the inputs and output. The price of tobacco is the most important determinant of the output supply and demand for inputs, and farmers’ response to increasing tobacco prices is positive but inelastic in the study area. The use of variable inputs such as fertilizers, labor, mechanical power, pesticides, and farmyard manure is important in resource allocation decisions in tobacco production. As a result, a price increase for green tobacco leaves would significantly increase the demand for farm inputs such as fertilizers, labor, mechanical power, pesticides, and farmyard manure. Tobacco production is negatively affected by the increasing input prices in the study area. Among the fixed factors, land area has a significant impact on tobacco productivity in the province. The present study is the first to quantify the farm-level input demand and output supply; therefore, based on the findings, the increasing tobacco production requires higher output prices and reasonable input prices.

Suggested Citation

  • Sajjad & Zahoor ul Haq & Javed Iqbal & Muhammad Faisal Shahzad, 2022. "Understanding the Profitability, Supply, and Input Demand of Tobacco Farms in Khyber Pakhtunkhwa, Pakistan," Economies, MDPI, vol. 10(3), pages 1-20, March.
  • Handle: RePEc:gam:jecomi:v:10:y:2022:i:3:p:59-:d:765889
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/10/3/59/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2227-7099/10/3/59/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Surjit S. Sidhu & Carlos A. Baanante, 1981. "Estimating Farm-Level Input Demand and Wheat Supply in the Indian Punjab Using a Translog Profit Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(2), pages 237-246.
    2. Zvi Eckstein, 1985. "The Dynamics of Agriculture Supply: A Reconsideration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(2), pages 204-214.
    3. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    4. Mano, Reneth & Nhemachena, Charles, 2007. "Assessment of the economic impacts of climate change on agriculture in Zimbabwe : a ricardian approach," Policy Research Working Paper Series 4292, The World Bank.
    5. Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
    6. Pfumayaramba, Tichaona, 2011. "Analysis of Flue-cured Tobacco Supply Elasticity in Zimbabwe 1980-2010: An Error Correction Model Approach," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100696, Australian Agricultural and Resource Economics Society.
    7. Sanzidur Rahman & Mohammad Mizanul Haque Kazal & Ismat Ara Begum & Mohammad Jahangir Alam, 2016. "Competitiveness, Profitability, Input Demand and Output Supply of Maize Production in Bangladesh," Agriculture, MDPI, vol. 6(2), pages 1-14, May.
    8. Rahman, Sanzidur & Parkinson, R.J., 2007. "Productivity and soil fertility relationships in rice production systems, Bangladesh," Agricultural Systems, Elsevier, vol. 92(1-3), pages 318-333, January.
    9. Townsend, Robert & Thirtle, Colin, 1997. "Dynamic Acreage Response: An Error Correlation Model for Maize and Tobacco in Zimbabwe," 1997 Occasional Paper Series No. 7 198059, International Association of Agricultural Economists.
    10. Marc Nerlove & Kenneth L. Bachman, 1960. "The Analysis of Changes in Agricultural Supply: Problems and Approaches," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 42(3), pages 531-554.
    11. Chatura Sewwandi Wijetunga, 2016. "Rice Production Structures in Sri Lanka: The Normalized Translog Profit Function Approach," Asian Journal of Agriculture and Rural Development, Asian Economic and Social Society, vol. 6(2), pages 21-35.
    12. Chatura Sewwandi Wijetunga, 2016. "Rice production structures in Sri Lanka: The normalized translog profit function approach," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 6(2), pages 21-35, February.
    13. Olwande, John & Ngigi, Margaret & Nguyo, Wilson, 2009. "Supply Responsiveness Of Maize Farmers In Kenya: A Farm-Level Analysis," 2009 Conference, August 16-22, 2009, Beijing, China 50786, International Association of Agricultural Economists.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shrabani Mukherjee & Kailash Chandra Pradhan, 2016. "Anatomy of Input Demand Functions for Indian Farmers across Regions," Working Papers id:11169, eSocialSciences.
    2. Eswaramoorthy, K., 1991. "U.S. livestock production and factor demand: a multiproduct dynamic dual approach," ISU General Staff Papers 1991010108000010523, Iowa State University, Department of Economics.
    3. Jaouad, Mohamed, 1994. "An agricultural policy and trade model for Morocco," ISU General Staff Papers 1994010108000011483, Iowa State University, Department of Economics.
    4. Perekhozhuk, Oleksandr, 2007. "Marktstruktur und Preisbildung auf dem ukrainischen Markt für Rohmilch," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 41, number 92322.
    5. Manyeki, John Kibara & Kotosz, Balázs & Kanó, Izabella Szakálné, 2021. "Unconditional factor demands and supply response for livestock products: A farm-level analysis of the Southern Rangelands of Kenya," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 16(3), September.
    6. Shumway, C. Richard, 1995. "Recent Duality Contributions In Production Economics," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(1), pages 1-17, July.
    7. W. Erwin Diewert, 2022. "Duality in Production," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 3, pages 57-168, Springer.
    8. Peichl, Andreas & Popp, Martin, 2022. "Can the Labor Demand Curve Explain Job Polarization?," IAB-Discussion Paper 202221, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. Intarapapong, Walaiporn & Peterson, E. Wesley F., 1998. "Environmentally Adjusted Measures Of Gains From Trade Liberalization: The Case Of U.S. Corn Production," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20914, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Aguiar, Victor H. & Kashaev, Nail & Allen, Roy, 2023. "Prices, profits, proxies, and production," Journal of Econometrics, Elsevier, vol. 235(2), pages 666-693.
    11. Bravo-Ureta, Boris E., 1985. "Estimates Of Cobb-Douglas And Translog Production Functions For Milk," 1985 Annual Meeting, August 4-7, Ames, Iowa 278514, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Sanzidur Rahman & Mohammad Mizanul Haque Kazal & Ismat Ara Begum & Mohammad Jahangir Alam, 2016. "Competitiveness, Profitability, Input Demand and Output Supply of Maize Production in Bangladesh," Agriculture, MDPI, vol. 6(2), pages 1-14, May.
    13. Chatura Sewwandi Wijetunga, 2016. "Rice production structures in Sri Lanka: The normalized translog profit function approach," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 6(2), pages 21-35, February.
    14. Liu, Karen, 1981. "Multiple Crop Supply and Factor Demand Component of the World Grains, Oilseeds, and Livestock Model," Staff Reports 276718, United States Department of Agriculture, Economic Research Service.
    15. Bernstein, Jeffrey I. & Nadiri, M. Ishaq, 1988. "Corporate Taxes And Incentives And The Structure Of Production: A Selected Survey," Working Papers 88-11, C.V. Starr Center for Applied Economics, New York University.
    16. Aradhyula, Satheesh Venkata, 1989. "Policy structure, output supply and input demand for US crops," ISU General Staff Papers 198901010800009909, Iowa State University, Department of Economics.
    17. Denis Lawrence & Anya Richards, 2004. "Distributing the Gains from Waterfront Productivity Improvements," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages 43-52, September.
    18. Fox, Kevin J. & Grafton, R. Quentin & Kirkley, James & Squires, Dale, 2003. "Property rights in a fishery: regulatory change and firm performance," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 156-177, July.
    19. McKay, Lloyd & Lawrence, Denis & Vlastuin, Chris, 1982. "Production Flexibility and Technical Change in Australia's Wheat-Sheep Zone," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 50(01), pages 1-18, April.
    20. Ngarava, Saul, 2020. "Impact of the Fast Track Land Reform Programme (FTLRP) on agricultural production: A tobacco success story in Zimbabwe?," Land Use Policy, Elsevier, vol. 99(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:10:y:2022:i:3:p:59-:d:765889. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.