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Cost and Return Comparison Between Paw San Rice and Non-Paw San Rice Production in Myanmar

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PSAKUIJIR

Vol. 4 No. 2 (July-December 2015)

Cost and Return Comparison between Paw San Rice


and Non-Paw San Rice Production in Myanmar
Phyu L. Myint* and Dr.Orachos Napasintuwong**

Abstract
To increase farm income by improving yields and reducing cultivation costs of
agricultural production implies suitable crop variety, application of appropriate technology,
correct crop management practices, and adequate level of inputs. Myanmars premium rice,
Paw San Mhwe, is awarded the World Best Rice at the World Rice Conference in 2011 in
accordance with its distinctive characters such as the excellent eating quality with soft
texture, delightful fragrance, white color with wet-polished, and especially elongation (three
times longer than the original size after cooking). The domestic prices of Paw San rice in
Myanmar are much higher than normal ones because of its preferred quality by Myanmar
consumers. Paw San rice cultivation therefore is still preferred by some farmers; however,
due to its lower yield than low-quality, high yielding varieties, the cultivation of Paw San
Rice may not suggest higher income for farmers. This study aims at comparing the economic
conditions between Paw San rice and other rice by using cost and return analysis. It is found
that Paw San rice variety receives higher price than non-Paw San varieties. Due to its lower
yield and vulnerability to diseases, the revenue and profit can be lower than non-Paw San
rice. To improve Myanmar rice farmers income, this study suggests that improvement of
yield and resistance traits of Paw San rice should be considered for Paw San rice breeding
research.
Keyword: Paw San Rice, Net Farm Income, Profit, Myanmar

Introduction
Myanmar is an agricultural country, and agriculture sector is the back bone by its
economy. Agriculture sector contributes to 30% of GDP in 2012-2013, 13.7% of total export;
and employs 63% of the total labor force (Department of Agricultural Planning, 2012). Rice
is also being designated as principal national crop, and all efforts are centered to the surplus
of rice production. In Myanmar, there are two groups of rice varieties; those are modern rice
varieties, and local rice varieties including both of local high quality varieties and local low
quality varieties. Paw San rice varieties are considered as high quality rice (Duffy et al.,
2001).
Rice prices in the domestic market vary across regions and varieties; price of Paw San
rice is much higher (about 2 times) than normal rice as shown in Figure 1.Therefore quality
rice cultivation may be one factor contributing to higher income for rice farmers. Almost all
of Myanmar farmers barely survive at very low income levels (Stiftung, 2012); part of the
reason is because most farmers still produce low quality rice. Among top ten rice varieties,
high quality rice cultivated area is only 6% of total monsoon rice sown area (World Bank,

Master Student, Department of Agricultural and Resource Economics, Faculty of Economics, Kasetsart
University and Deputy Staff Officer, Extension Division, Department of Agriculture, Ministry of Agriculture
and Irrigation, Myanmar; Email: phyulaymyint1980@g mail.co m
**
Assistant Professor, Department of Agricultural and Resource Economics, Faculty of Economics, Kasetsart
University; Email: orachos.n@ku.ac.th

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Vol. 4 No. 2 (July-December 2015)

2014). Besides, Paw San rice is still not significantly leading to the export market. As shown
in Figure 2, the share of Paw San rice in total rice exports is only 0.04% in 2013/2014 even
though it has more favorable eating characteristics. Therefore, it is important to understand
the costs and returns and other economic factors of Paw San rice cultivation as compared to
other varieties to examine whether farmers will be more beneficial by growing the high
quality varieties.

Fig. 1 Monthly rice prices in Yangon Bayintnaung Market, 2012


Note: Sinthwelatt, Ngasein and Manaw-thukha are high yielding varieties.
Source: Market Information Service (2013)

Figure 2 Share of rice exportsfromMyanmar, 2013/2014


Source: Myanmar Agricultural Product Trading (2014)

Materials and Method


Cost and Return Analysis
The relationship between costs and returns is the most important factor in making a
wise decision economically (Herbst & Erickson, 1976). Cost and return analysis is the
measurement of economic profit. Maximizing economic profit of a firm does not imply only
by obtaining high price for commodity, but also minimizing the cost of production. In
accordance with Varian (2006), profits can be defined as revenues minus cost. This study
focuses on the comparison between Paw San rice and Non-Paw San rice varieties by
analyzing net profit per area using cross-sectional data from a farm survey. Suppose that a

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PSAKUIJIR

Vol. 4 No. 2 (July-December 2015)

farmer produces rice output


and uses a vector of inputs
; let the price of rice output be
and a vector of input prices be , the profit a farmer receives, , can be expressed as
(1)
where

=
=
=
=
=
=
=

net revenue (profit)


total revenue
output price
quantity output
total variable cost
price of variable input
variable inputs include labor, animal usage, seed, chemical
fertilizer (urea, t-super, potash and compound), organic (cow
and chicken) fertilizer, pesticides, insecticides, fungicides,
herbicides, irrigation, and machinery usage.

This study considers only variable inputs, not fixed input because in short run profit
maximization, a farmers can still operate even if the loss incurs from taking into account total
cost, but he should not continue to operate if the loss incurs from taking into account only
variable costs. In other words, variable profit is calculated to show the short-run profit
maximization decision.
Test Statistics
According to Bruning & Kintz (1997), one of the most commonly used tests of
significance is the t-test to determine the difference mean that statistically independence of
each other between two groups. This study uses t-test for testing the difference between two
independent means as follows:
t

where

=
=

=
=
=
=
=
=

(2)

mean values(i.e. total cost, total revenue, total profit, yield and
yield losses, total farm size and input usage) of Paw San rice
mean values (i.e. total cost, total revenue, total profit, yield and
yield losses, total farm size and input usage) of non-Paw San
rice
the sum of the squared values of Paw San rice
the sum of the squared values of non-Paw San rice
the square of the sum of values of Paw San rice
the square of the sum of values of non-Paw San rice
number of observation of Paw San rice
number of observation of non-Paw San rice

In accordance with Spence et al.(1968),


(Chi square) is to find the goodness of fit,
a test for the significance of difference between two or more groups with the choices of some
variables, and sometimes said it to be a test of independence. Bruning & Kintz (1997)

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Vol. 4 No. 2 (July-December 2015)

suggested that a significant Chi square statistics is interpreted as showing a relationship


between the two variables. Therefore, Chi square testis used in this study to compare
variables of choices between two groups: Paw San versus non-Paw San.
(3)
where

=
=

observed frequency
the corresponding expected frequency

Sampling Design
A stratified random sampling method without replacement was used in this study to
allocate the total sample into groups. Ayeyarwaddy and Sagaing are chosen for the scope of
this study as the majority of Paw San rice is cultivated in these two regions. The sampling
technique was based on proportional stratified sampling (Cochran, 2007). Phyapong, Pathein
and Maub in district sunder Ayeyarwaddy region, and Shewbo, Monywar, Sagaing and
Tamuu districts under Sagaing region are randomly selected based on the cultivated intensity
in the first stage and the existence of seed farms in the second stage. In this study, a face-toface interview was conducted from 370 farmers consisting of 561fields of the rainy season in
2013. Since Paw San rice is mainly photoperiod sensitive, and the non-photoperiod sensitive
varieties have longer maturity time, almost all of Paw San Rice is cultivated during the rainy
season.
Results and Discussion
There were 24 varieties of rice including four varieties of Paw San group: Paw San
Taung Pyan, Paw San Mhwe, Paw San Bay Kyar and Paw San Yin, grown n Ayeyarwaddy
region, the most flooding area in Myanmar, and Sagaing region, the Central dry zone of
Myanmar, during 2013/14wet season (Figure 3). There were 157 plots of Paw San and 75
plots of non-Paw San in Sagaing region, and 158plots of Paw San and 171 plots of non-Paw
San in Ayeyarwaddy region. Over 65% of rice grown in Sagaing region was Paw San Bay
Kyar while Paw San Mhwe was not found in this region, and the other two Paw San varieties
were under 1%. Except for Paw San Yin, the rest all Paw San varieties in Ayeyarwaddy
region were photoperiod-sensitive, and therefore were mostly cultivated because of the
favorable weather condition including temperature and rainfall. Chang & Vergara (1985)
found that the flowering of the rice plant is mainly controlled by two ecological factors such
as day length and temperature. Denning et al.(2013) found that farmers often prefer local
varieties during the monsoon season, especially in areas that are subject to flooding and to
overcome from using fertilizer where there is increased risk both of flood or drought. This
finding is mostly consistent with this study because 53%of total rice area in Ayeyarwaddy
and 30% in Sagaing region was Paw San rice during the monsoon season in 2013.
Wong & Wai (2013) also suggested that Shwebo and Sagaing areas are expected to
benefit most from increasing border trade with China. Zaw et al. (2011) proposed that
Ayeyarwaddys rice products can easily be transported to both export and local market
through not only highway roads but also quayside. Survey data from this study are consistent
with those of Department of Agriculture that 99% Paw San rice cultivated area in Sagaing
region was under Shwebo district. Furthermore, Ayeyarwaddy region is where Paw San rice
was grown most in the country.

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Vol. 4 No. 2 (July-December 2015)

Fig. 3 Share of rice varieties grown in Sagaing and Ayeyarwaddy regions


The government of Myanmar recently permitted a distribution of title-deeds for land
utilization so the majority of rice farmers have land ownership while only small numbers
have rented land. The results show that Paw San and non-Paw San are not significantly differ
by land holding status, crop establishment and preference of soil fertility (Table 1).About
80% of both Paw San and non-Paw San rice uses transplanting rather than broadcasting for
crop establishment in Myanmar. Crop establishment appears not depending on the rice
variety, but perhaps field situations such as upland or flooding areas. Most soil is moderately
fertile in both Paw San and non-Paw San rice production while about one-fourth of the plots
is good and small amount of land is poor fertility.
Table 1 Farm characteristics of rice farming in Myanmar, rainy season, 2013/14
Farm characteristics
Paw San
Non Paw San
Overall
Chi-square
Land holding status
0.67
Rent
5 (1.59)
2 (0.81)
7 (1.26)
Own
310 (98.41)
244 (99.19)
554 (98.75)
315 (100.00)
246 (100)
561 (100)
Crop establishment
0.35
Broadcasting
59 (18.73)
51 (20.73)
110 (19.61)
Transplanting
256 (81.27))
195 (79.27)
451 (80.39)
315 (100.00)
246 (100)
561 (100)
Soil fertility
3.26
Good
79 (25.08)
66 (26.83)
145 (25.85)
Moderate
218 (69.21)
157 (63.82)
375 (66.84)
Poor
18 (5.71)
23 (9.35)
41 (7.31)
315 (100.00)
246 (100)
561 (100)
Note: Numbers in parentheses are the percentage of farm characteristics of Paw San and nonPaw San.
The comparison of input use between Paw San and non-Paw San rice is presented in
Table 2. The cultivation practices obviously differ in the two regions. On average the amount
of seed usage for Paw San is significantly less than non-Paw San rice, particularly in Sagaing
region, but not in Ayeyarwaddy region. Paw San farmers in Ayeyarwaddy region
significantly use less urea (N 2 ) and compound fertilizer for Paw San than for non-Paw San,

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Vol. 4 No. 2 (July-December 2015)

but almost the same in Sagaing region. Farmers on average of the two regions also use triple
super phosphate for Paw San more than for non-Paw San. This is consistent to the reason that
Paw San rice is low responsive to urea(Duffy et al., 2001) than phosphate (P2 O5 ).Paw San
rice farmers depend on the treatment of pesticides, insecticides, and herbicides more than
non-Paw San rice farmers. This is because Paw San rice is more vulnerable to pests and
diseases such as rice stem borer. Naing et al. (2008) and Morris &Waterhouse (2001) cited
Denning et al. (2013) concluded that grain yield losses due to diseases and pests were for the
most part insignificant. This conclusion is different from this study because the most it is
found that yield losses occurred from the disturbance of rice stem borer more than heavy
raining as shown in Table 4.The farmers who grow Paw San rice in Ayeyarwaddy region
utilize lower amount of all chemical and organic fertilizer than those in Sagaing region. This
might be because Ayeyarwaddy River provides more silt soil which is suitable for Paw San
rice cultivation.
When comparing rice price of Paw San rice and non-Paw San rice for both milled rice
and paddy as shown in Table 3, it is found that Paw San rice has higher price than non-Paw
San rice. This partly is due to the amylose content (AC) which reflects the softness and
quality of rice varieties. Myint (2013) found that non-Paw San has higher AC which makes
the rice harder. Paw San rice has 21% AC while other popular varieties such as Sinakayi-1,
Manawthukha, IR-747, Theehtatyin, Shwewahlay, and Shwewahtun, have 22.8%, 26.5%,
30.4%, 30.4%, 30.8%, and 31.7%AC, respectively. Apart from this, Denning et al., (2013)
recommended that local varieties, such as Paw San Yin, are typically of higher eating quality
and bring as much as double the price of the high yielding varieties. In fact, the prices of
paddy of both Paw San rice and non-Paw San rice increase gradually over time of selling
while those of milled rice appear to be the opposite. It is observed that for milled rice,
farmers generally receive higher price if they sell their products directly to the millers rather
than the other sources such as collectors or traders.
The result of cost and returns comparison is shown in Table 4.Total variable cost of
Paw San in Sagaing region and on average of the two regions is significantly higher than nonPaw San, but it is a reverse in Ayeyarwaddy region. As seen from Table 2, the costs of
pesticides, insecticides, and herbicides are significantly higher for Paw San rice cultivation.
Even though prices of Paw San rice is higher than non-Paw San rice, yield of Paw San rice is
significantly much lower than non-Paw San varieties. Since there was an outbreak of rice
stem in Sagaing region during the survey year, yield losses from stem borers appear to be
larger for Paw San rice in Sagaing region and on average of the two region than non-Paw San
rice. This is because Paw San rice has longer period and thus is more vulnerable to rice stem
borer than non-Paw Sanvarieties. As a result, total revenue and profit of Paw San is
significantly higher than non-Paw San rice only in Ayeyarwaddy region, but not in Sagaing
region.

Conclusion
Paw San rice is highly preferred by Myanmar consumers for its high eating quality,
and after it won the world best rice in 2011, it also has good potential for high quality rice
export markets. Paw San rice evidently receives much higher price than non-Paw San rice in
Myanmars domestic market. However, due to lower yield and vulnerability to diseases such
as rice stem borer that may create more loss during the devastation than non-Paw San
varieties, Paw San rice cultivation depend heavily on insecticides, pesticides and herbicides.
The result of cost and return analysis in Sagaing and Ayeyarwaddy regions shows that the
profit of Paw San rice cultivation is not necessarily more attractive than non-Paw San
varieties, particularly when there is a devastation of rice stem borer. In Ayeyarwaddy region

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Vol. 4 No. 2 (July-December 2015)

where rice cultivation generally uses less fertilizer than Sagaing region, and fertilizer usage
especially urea and compound fertilizer for Paw San rice is less than for non-Paw San rice
due to more nutrients from Ayeyarwaddy river, farmers are more profitable producing Paw
San rice than non-Paw San rice varieties. In order to improve the income of Paw San rice
farmers and to promote the expansion of Paw San rice production, this study suggests that the
breeding program of rice in Myanmar should consider increasing yield and more resistant of
diseases for Paw San rice.
Table 2 Input usage and cost of Paw San and non-Paw San Rice in Myanmar, rainy season,
2013/14
Variable

Group

Seed usage (basket/acre)

Paw San
Non Paw
San
Paw San
Non Paw
San
Paw San

Urea fertilizer (kg/acre)

T- super phosphate (kg/acre)

Potash (kg/acre)

Compound fertilizer (kg/acre)

Cow manure (cart/acre)

Chicken manure (basket/acre)

Pesticides and insecticides


costs (kyats/acre)

S againg Region
Mea
S td.
tn
dev
value
1.31
0.65
5.039
1.76
0.60
***
55.67 21.80
57.35 25.10 0.502

41.46
48.46

18.30
20.59

25.38

10.92

25.47

12.16

3.197
***
0.055

53.96

29.18

Non Paw
San
Paw San
Non Paw
San
Paw San
Non Paw
San
Paw San
Non Paw
San
Paw San

36.43

18.19

27.45
30.14

22.97
14.68

0.281

19.17
19.62

10.91
11.74

74.01
70.03

37.65
32.82

0.709

36.25
50.07

15.25
18.63

2.37
3.85

1.53
1.97

1.57
1.53

1.13
1.01

n/a

n/a

5.140
***
n/a

9.63

7.67

Non Paw
San
Paw San

n/a

n/a

9.90

6.09

5,855
.36
2,908
.67
261.2
7
134.9
3
4,890
.57
3,236
.40

9,084
.73
4,113
.24
1,243
.85
875.7
9
5,478
.31
4,481
.60

2,357
.31
1,717
.22
30.79

3,115
.61
3,061
.86
287.9
9
276.8
8
945.8
6
568.0
8

Fungicides cost (kyats/acre)

Non Paw
San
Paw San

Herbicides cost (kyats/acre)

Non Paw
San
Paw San
Non Paw
San

1.497

Ayeyarwaddy Region
Mea
S td.
tn
dev
value
2.07
0.71
1.891
2.23
0.83

2.679
**

0.791

28.45
2.274
**

154.7
5
82.46

Overall
S td.
tdev
value
0.78
5.909
0.80
***
48.56 21.32
51.00 22.28 1.288
Mea
n
1.69
2.09

30.54

19.18

26.13

12.78

0.187

21.24
20.98

15.05
12.52

0.096

2.447
**
0.211

70.09
64.50

37.76
30.80

1.156

2.00
2.62

1.41
1.92

0.060

9.63

7.67

9.90

6.09

3.162
***
0.060

1.879

4,100
.78
2,080
.47
145.6
7
60.91

6,994
.69
3,452
.15
907.4
4
535.9
8
4,575
.54
2,899
.49

0.075

0.848

2,507
.58
1,044
.02

2.094
*

4.152
***

1.299

4.375
***

Note: Seed of paddy in 1 basket = 46 lbs, 1 hectare = 2.471 acre, US$ 1 = 1208 kyats as of7th ,
April 2015
*, **, *** are significance at 10%, 5% and 1% level, respectively.

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Table 3 Selling price of Paw San rice and non-Paw San rice, 2013/14
Milled rice
S td.
Dev
4,919
4,083
6,230

Time of sales

Group of rice

First time
Second time

Paw San
non-Paw San
Paw san

Mean
18,176
15,914
16,039

Third time

non-Paw San
Paw San

12,647
n/a

4,429
n/a

non-Paw San

n/a

n/a

1.793

Mean
7,102
5,524
8,886

Paddy
S td.
Dev
1,628
1,218
1,626
1,646
2,010

5.491***

n/a

6,657
9,522
7,239

1,499

3.895***

t-value
0.936

t-value
12.525***

Note: 1 basket of paddy = 46lbs, 1 basket of milled rice form = 75 lbs


US$ 1 = 1208 kyats as of 7th , April 2015
*** is significant level at 1%.
Table 4 Total cost, total revenue, total profit, yield, and losses of rice cultivation in
Myanmar, rainy season, 2013/14
Variable
Total Variable Cost
(kyats/acre)

Total Revenue
(kyats/acre)

Total Profit
(kyats/acre)

Yield (bsk/acre)

Loss by rain
(bsk/acre)

Loss by stem borer


(bsk/acre)

Total farm size


(acre)

Variety
Group

S againg Region

Ayeyarwaddy Region

249,88
6.80
236,25
8.10
319,37
1.20
314,52
6.80
69,555
.22
78,120
.48
37.20

S td
Dev
37,133
.68
37,410
.63
151,24
0.10
128,51
5.30
153,54
5.60
119,09
3.80
17.04

Non Paw
San
Paw San

52.17

18.82

6.048
***

n/a

n/a

n/a

Non Paw
San
Paw San

n/a

n/a

34.42

15.30

Non Paw
San
Paw San

28.32

15.10

7.99

5.60

Non Paw
San

5.93

3.46

Paw San
Non Paw
San
Paw San
Non Paw
San
Paw San
Non Paw
San
Paw San

Mean

tvalue
2.608
**

0.239

-0.426

2.241
*

3.443
***

162,10
1.30
168,25
9.80
314,41
4.10
298,83
0.50
156,59
7.80
126,61
1.60
50.77

S td
Dev
25,39
4.60
24,82
4.67
74,54
0.80
66,63
2.61
71,93
2.56
68,84
4.47
10.22

205,85
4.70
188,99
1.00
316,88
4.80
303,61
6.00
113,21
4.70
111,82
7.70
44.01

S td
Dev
54,223
.55
42,828
.03
118,94
6.50
90,120
.68
127,28
0.40
89,849
.75
15.58

54.37

11.33

3.015
***

53.70

14.04

7.632
***

7.78

7.26

-0.675

7.67

7.12

-0.686

9.48

10.19

9.33

10.05

13.50

5.02

32.60

15.83

5.53

2.486
**

18.64

25.85

13.94

19.12

21.01

1.196

13.58

16.35

16.71

14.83

13.42

13.45

Mean

tvalue
2.223
*

Overall

2.002
*

3.863
***

Mean

tvalue
4.00*
**

1.454

0.145

2.917
***

0.123

Note: Total variable cost includes costs of labor, animal usage, seed, chemical fertilizer (urea,
t-super, potash and compound), organic (cow and chicken) fertilizer, pesticides, insecticides,
fungicides, herbicides, irrigation, and machinery.US$ 1 = 1208 kyats by 7th , April 2015
exchange rate;1 hectare = 2.471 acre, 1 basket of paddy = 46lbs
*, ** and *** are significant level at 10%, 5%.and 1%, respectively.

Acknowledgement
The authors thank Southeast Asian Regional Center for Graduate Study and Research
in Agriculture (SEAMEO, SEARCA) and the Graduate School of Kasetsart University for
financial supports.
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