Economic modelling of farmers’ choice on sugarcane production

The sugarcane farming and sugar industry are facing huge challenges to its associate actors and stockholders at different stages of production, processing, marketing and consumption in recent periods due to changes of supply and demand factors. The market forces of sugarcane and its derivatives are determined by many factors both at macro and farm level. This study assumed that supply of a crop output takes place in two stages. At first stage, farmers decide to choose a particular crop which is determined by many factors like price of output, cost of production, farm size, household size, credit and insurance availability, etc. In second stage, after choosing a crop for cultivation, size of output is determined by many factors afore mentioned. This kind of problem can be analysed empirically with the help of Heckman Sample Selection model. We used large size (over 35,000 sample farmers) cross-sectional survey data collected by National Sample Survey Organisation in India pertaining to the year 2012-13. We noted that market price of competing crops such as paddy and cotton have negative relationship with crop selection and amount of production of sugarcane. Minimum support price and its awareness among farmers, crop diversification, availability of credit and extension contact were also positively related to the choice and output of sugarcane. Therefore, the farmers choice on crop which cover price risk, institutional support and extension linkage are positively expand area and intensity of production thereby bridging gap of sugar and its associate demand and supply in near future.