Rice value chain in Jhapa District, Nepal: performance measurement and upgrading strategies using stochastic frontier analysis
2024
Shrestha, D.M.
The study examined the rice industry in Jhapa District, Nepal focusing on the value chain and profit efficiency of the chain actors. The aim was to come up with policy recommendations and potential interventions to upgrade the rice value chain of Jhapa. A survey of 257 rice producers selected using multistage purposive random sampling, from whom downstream actors were traced for interview using structured questionnaires. Value chain mapping was performed along the analysis of pricing mechanisms interfirm relationship, and constraints. Chain actor performance in terms of net profit, profit margin, value added, etc., were evaluated and compared across channels that were found to operate within the rice value chain. A single step stochastic frontier approach using Cobb-Douglas profit function was likewise employed to determine profit efficiency and sources of inefficiencies using Maximum Likelihood estimation techniques. The study found the vital role of cooperatives in increasing the net profit of the producers and in providing various support services, but they are less prioritized. Producers were price takers and millers were the price setters with higher profit margin, but lower benefit cost ratio. The stochastic frontier analysis revealed that price of seeds, fertilizer, plant protection, rented tractor, rented thresher, labor cost and the area of rice cultivation significantly impact the profit of paddy growers. Their mean profit efficiency was 41 percent. The longest channel had the least (37.22%) profit efficiency while the highest (65%) was the shortest without collectors as actors, suggesting that indeed longer channels are penalizing the producers.
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