Ex-ante study on the economic viability variety development for unfavorable rainfed lowland (URFL)

The Cost Benefit Analysis was carried out to determine the economic viability of developing new rice variety for rainfed lowland using Iloilo and Pangasinan as cases. Results of the survey showed that farmers from these two provinces are considered small farmers with average farm size of 1.48 hectares. They are also planting several and multiple varieties of rice but these are mostly suited for irrigated lowland ecosystem. Among the inputs used, seeds and fertilizers are the most dominant. On the average the total costs of production are higher during the wet season than during the dry season with higher percentage due to cash cost. As a whole the average yield was 3.25 tons per hectare and given the average price of palay of PhP10.40 per kg leaves an average net income above cash cost amounting to PhP7,944 per hectare during the dry season and PhP4,711 per hectare during the wet season. However, when the non-cash costs are considered most of the farmers would end up with negative net income. This means that accounting for the non-cash cost would make farming in the rainfed lowland areas unprofitable. Almost all the farmers are willing to adopt the new rice variety for rainfed lowland provided the desired characteristics are met. These include: high yield, drought and pests and diseases resistant, good eating quality and early maturing. Farmers want to receive information about new rice variety from the municipal agricultural officers of the Department of Agriculture due to the latter's expertise. They are also good sources of seeds. Results of the benefit cost analysis showed that, given the cost of varietal development using the conventional breeding method, and target yields of 3.5 tons-4.0 tons per hectare for Iloilo and Pangasinan, the varietal development would be economically viable. At the target yield of 3.5 tons per hectare, the NPVs are PhP810,803,315 and 395,869,187 while the BCRs are 2.78 at 5% and4.21 at 10% at 5% and 10% discount rate, respectively. On the other hand, if the target yield of .40 tons per hectare is achieved, the NPVs and BCRs would increase to PhP4,471,890,482 and 8.35 at 5% discount rate and Php2,193,594,325 and 12.64 at 10% discount rate. Sensitivity analysis also showed that reduction in the coverage area by half, and increased in costs of developing new seeds, would still be profitable, provided the target yields are maintained and prices are held constant. The target yield of 4.0 tons per hectare would be beneficial to farmers since, it would give positive net income above cost for all tenure. If the yield would be 3.5 tons per hectare only, the leasee and farmers under the other tenurial arrangements would still incur losses or negative net income above total costs. This is because of the huge non-cash costs due to the value of kept seeds for production and value of amortization and lease payment in kind.