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Determinants of Regional Marketed Surplus of Agricultural Commodities
A Case Study of Gaya District, Bihar

Binod Kumar
SK Mishra

1. Introduction

The nature and the behaviour of marketed surplus of agricultural produce have attracted the attention of a number of research workers in agricultural economics. However, most of the studies carried out in this subject are on the response of individual farmers to prices of the agricultural produce and seasonality in the market arrivals. Nevertheless, the generation of marketed surplus of agricultural produce is an involved process accounting for the actions and reactions of numerous social and economic factors at the regional level. This study makes an attempt to make an enquiry into these aspects.

2. Postulates

By far, the most important factor that determines the volume of marketed surplus of a crop is the gross area cultivated under that crop. Larger is the gross area under cultivation of a crop, larger is the volume of the marketed surplus, in general. Also, it is not unlikely that the area under cultivation by different holding size categories of farmers plays an important role in deciding the volume of the marketed surplus. This is so because one may expect marketed surplus to be larger if the land is concentrated in a few hands. By implication, larger would be the area under small and marginal holdings, smaller would be the volume of the marketed surplus. Small and marginal farmers handle produce just enough for consumption; on the top of it, a sizeable portion of their produce is disposed off for repaying the debt, etc. This type of disposal locally changes the hands and it may be expected that they do not add to the main stream of marketed surplus arriving at the regional market centers.

Further, it may be postulated that cropping pattern (that is, the area under cultivation of a crop as a ratio to the total area sown) may have a significant impact on the volume of marketed surplus. Cropping pattern favouring a certain crop indicates to the comparative advantages in raising that crop. These comparative advantages are reflected in terms of the price of the produce or in terms of the relative yield rate or both. In any case, it is likely to enhance the marketed surplus of the favoured crop.

Apart from these, one may postulate that the spatial location of market centers themselves may determine the volume of marketed surplus. It may be so partly because more distant are the market centers from the source of surplus, less they would be able to attract the surplus. Distance causes the cost of transportation to increase and the returns accruing to the farmers decrease. Another reason may be that since market places are usually urban centers as well, farther they are located from the villages, weaker is their impact on the farming practices such as cropping pattern, use of modern inputs, needs for magnetization of exchange relationships, etc. As a consequence, distant are the market centers, less would be the volume of marketed surplus.

In turn, a query may be made as to what are the factors that determine the gross area under cultivation of a particular crop. In this connection it may be held that the gross area under cultivation of different crops are simultaneously determined by several factors and as such, the cropping pattern itself is determined collectively and not individually. The cropping pattern may be postulated to be determined by the decision and practice of the farmers regarding the acreage devoted to different crops, which in turn depend on several economic and institutional factors. However, in the determination of the cropping pattern factors like land-man ratio, irrigation intensity, urban/rural population ratio, ratios of area owned by marginal and small farmers to the total area under cultivation and so on may be quite prominent. High man-land ratio may bring in larger area under the cultivation of cereals; irrigation intensity may attract larger area under the crops like wheat, HYV rice, etc. High urban-rural population ratio may attract more area under the cultivation of the crops like potato, wheat, gram, etc. Higher ratios of area under marginal and smaller farmers to the total area under cultivation may lead to extensive cultivation of cereals and staple food crops.

Likewise, the ratio of area cultivated by small and marginal farmers to the total area under cultivation may be significantly affected by the factors like man-land ratio, irrigation intensity, urban-rural population ratio, the number of agricultural labourers per farmer and so on. High man-land ratio may further aggravate skewness in land distribution. Similar may be the impacts of higher irrigation intensity and high urban-rural population ratio. Higher ratio of agricultural laboures per farmer may have depressing effects on agricultural wage rate and it may enhance the practice of share cropping. Relative advantages of scale economies in farming may arise due to that, which in turn may have a significant influence on the dynamics of land distribution.

The postulates regarding the role and importance of different factors that directly or indirectly determine marketed surplus as discussed above may be relevant to formulating an interdependent system of relationships aiming at an empirical test therof, based on the data at some regional level. For this purpose we have taken up the district of Gaya, Bihar as an object of study.

The district of Gaya comprises 46 development blocks. For estimating the relationships postulated in the earlier section, we have collected data at the block level for the year 1980-81. The sources of the data are all secondary. We have dealt with five major crops, namely rice, wheat, maize, gram and potato.

3. Nomenclature and the Model

We use the following nomenclature to denote the variables used in this study:

Using the convenient algebraic symbols for the variables as defined above, the relationships among different variables directly or indirectly determining the volume of marketed surplus of different crops may be summarized as follows:

The notional form described above may be considered as a schematic model of mechanism through which the bulk of marketed surplus of different crops is determined. As the structure of the schematic model indicates, it characterizes simultaneity in the relations so formulated. Further, it may be observed that Ys are determined endogenously while Xs are predetermined or exogenous in nature.

Further we postulate that the relations as formulated above form a linear system of equations, each one incorporating a disturbance term. We estimate the structural parameters of the model by the method of Two-Stage Least Squares.

4. The Empirical Relations

We have statistically estimated the structural coefficients of the econometric model outlined in the preceding section. The estimated structural equations are given below :

Significant at 1%, Significant at 5%, Significant at 10% prob levels. Degree of freedom = 46-k where k is the number of parameters in the estimated equation concerned.

In the estimated (empirical) structural equations presented above, it may be noted that only two variables have significant role in explaining the marketed surplus of a particular crop directly. These variables are : the area cultivated under the crop concerned and the index of accessibility to the market centers. Other variables, namely, the ratio of area under marginal and small farmers to the total area under cultivation and cropping intensities have negative contributions to the determination of the bulk of marketed surplus.

In explaining the area under marginal farms as a ratio to the total area under cultivation, the contribution of X9 (agricultural labour-cultivator ratio) alone is statistically significant. However, the ratio of area under small farms to the total area under cultivation is determined by two variables, namely X6 (rural land-man ratio) and X9 (agricultural labour-cultivator ratio).

The last five structural equations (Y8 through Y12) show different structures. The percentage areas under rice and wheat (y8 and Y9) are explained significantly by only two variables, namely, the area under these crops (respectively) and the ratio of urban to rural population in the block. However, the percentage area under maize, gram and potato are determined by irrigation intensity also, the relationship being negative, meaning that higher is the intensity of irrigation lower is the favour granted to cultivation of maize, gram and potato. Especially in cultivation of gram the man-land ratio has a negative effect.

5. Conclusion

The findings reveal that the bulk of marketed surplus of the crops under study are explained significantly by only two factors, area under cultivation of the particular crop and the index of accessibility to the market centers. In turn, the area devoted to cultivation of different crops is determined by the urban-rural population ratio in the block and the irrigation intensity. The urban-rural population ratio has all-pervasive effects on the cropping pattern leading to intensive cultivation, while irrigation intensity affects cultivation of maize, gram and potato adversely and by implication, cultivation of rice and wheat favourably.

References

  1. Harris, B (1982) "The Marketed Surplus of Paddy in North Arcot District, Tamil Nadu : A Micro Level Causal Model", Ind. J of Agricultural Economics, Vol. 37(2).
  2. Kumar, Binod (1983) Regional Planning Approach to an Efficient Agricultural Market System, (unpub) MRP Dissertation, Dept. of Arch & Regional Planning, IIT, Kharagpur.
  3. Govt. of Bihar (1983) District Statistical Hand Book - 1982-83.

This paper was published in The NEHU Journal of Social Sciences and Humanities, Vol III (3), 1985.

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